Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions —

Mr. Speaker: If, when they are called, hon. Members ask only one supplementary question, we shall be able to have many more questions answered.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Chile (Human Rights)

Mr. Clinton Davis: asked the Secretary of State for Foreign and Commonwealth Affairs what representations have been made to the Chilean junta by Her Majesty's Government concerning violations of human rights over the course of the last three months.

Mr. Flannery: asked the Secretary of State for Foreign and Commonwealth Affairs when Her Majesty's Government last protested to the Chilean Government concerning the violation of human rights in Chile.

The Minister of State, Foreign and Commonwealth Office (Mr. Cranley Onslow): The British ambassador in Santiago made representations to the Chilean Foreign Minister on 3 April. I also raised the question of human rights with the Chilean ambassador on 6 May.
The Chilean Government have taken note of our representations, and are therefore in no doubt as to our concern.

Mr. Davis: I appreciate that the Minister's answer shows that the Government are not prepared to be selective in their condemnation of Fascist tyranny, but what are the Chilean Government doing in response to the representations that have been made? Am I not right in thinking that singularly little has been done in response to similar representations that have been made by the Government since 1979?

Mr. Onslow: Representations have been made over a period of time by the Government and their predecessors. The hon. Gentleman has probably studied the report of the Special Rapporteur of the United Nations General Assembly, which was published in November 1981. That report lists the areas of concern, and they are well known to the Chileans. We have impressed upon them our hope that they will show by their actions this year that they appreciate the importance of the issue and the need to move forward to a more acceptable position.

Mr. Flannery: Does the Minister remember the torturing of Sheila Cassidy, who is now president of the Chilean human rights committee? Does he further

remember that William Beausire, who is a British as well as a Chilean citizen, was kidnapped from a plane in Argentina while on his way to Paris, taken back to Chile and tortured there? We have reason to believe that that young man is still alive. Are the British Government doing anything to get William Beausire home and to find out what the Chilean Government have done?

Mr. Onslow: Both those cases are familiar. The Chilean Government are well aware of our concern. They know that we do not regard either of those cases as closed. We have pressed them to pursue the matter as best they can, but there are obvious difficulties, of which the hon. Gentleman will be aware. I shall continue to draw the concern of the House about those people to the Chilean Government.

Several Hon. Members: rose—

Mr. Speaker: Order. I remind the House that questions must be about Chile.

Falkland Islands

Mr. Winnick: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the Falkland Islands.

Mr. Onslow: Following the surrender of the Argentine forces on the islands, we are proceeding with all possible urgency on the task of rehabilitation. The task force has done most valuable work in the re-establishment of essential services in Port Stanley, including the schools, and in the provision of internal communications. The civil commissioner has sent us his assessment of the immediate requirements. These are being given priority and action has already been taken to identify suppliers and obtain shipping dates for the equipment most urgently needed, as well as to recruit further essential personnel.

Mr. Winnick: Should not the Government stop making party capital out of the conflict and think hard about the future of the Falkland Islands? Has a form of United Nations trusteeship been completely ruled out?

Mr. Onslow: I think that the hon. Gentleman is trying to make party capital out of this matter. Our priority is to get life on the islands back to normal as fast as we possibly can. The long-term future of the islands will have to be considered. In the meantime, I see no reason to form any firm ideas. There are more important things to do.

Mr. Brocklebank-Fowler: What estimate has the hon. Gentleman made of the cost of rehabilitation, reconstruction and development? Will a separate budget be made available for that purpose, or will the money come from the ODA allocation?

Mr. Onslow: Until the civil commissioner has been able to complete his stocktaking of the damage that has been done and the property that has been lost, and until we have Lord Shackleton's report and recommendations as to what might be done in future, it is impossible to give the House a firm figure. However, when that becomes possible, it will be done. In the interval, I assure the House that a shortage of financial authority is unlikely to hold up any essential work.

Mr. Bill Walker: Is my hon. Friend yet in a position to say whether the Argentine prisoners are producing any


reaction from the new junta in the Argentine and whether there is any likelihood that it will stop any attempts at further hostilities?

Mr. Onslow: As soon as we have a firm and reliable indication that hostilities have ceased and will not restart, we shall be anxious to return the prisoners of war to their native country. I hope and believe that we shall soon be in that position. There are indications, but it is difficult to know what they mean. However, I am glad to tell the House that we have been informed by the United Nations Secretary-General that, according to the Argentine representative at the United Nations, Flight Lieutenant Glover is to be released and should arrive in Montevideo this afternoon.

Mr. Healey: In view of the heavy price that was paid for ignoring evidence earlier in the year that the Argentines might be planning to invade the Falklands, will the hon. Gentleman assure the House that the Governments of Guatemala and Venezuela are left with no illusion about how seriously we would take it if they were to use force in pressing their claims against the independent Commonwealth countries of Belize and Guyana?

Mr. Onslow: I do not want to comment on the right hon. Gentleman's preamble. The Governments of Guatemala and Venezuela must be aware of what has occurred. I hope that they will not embark upon similar reckless adventures. We have noted recent statements that the Government of Venezuela intend to pursue their frontier dispute with Guyana by peaceful means. Statements coming out of Guatemala are difficult to analyse.

Middle East

Mr. Les Huckfield: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on his latest discussions with EEC Ministers about events in the Middle East.
The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd) In their statement of 29 June following the meeting of the European Council, the Ten set out the principles which in our view could serve as the basis for the lasting restoration of peace and security not only in Lebanon but in the Middle East as a whole.
We remain deeply concerned about the situation in Lebanon and are doing what we can to relieve the suffering of the victims. Mr. Habib, President Reagan's envoy, is still at work. We hope that his efforts will lead to a ceasefire which will last, and to arrangements for disengagement of forces, as a first step towards full implementation of recent resolutions of the Security Council.

Mr. Huckfield: Will the Minister acknowledge that the main problem in the Lebanon historically has been the intervention of far too many outside forces? What are the Government doing to implement the withdrawal of all external armed forces and ultimately to restore sovereignty to the Lebanese?

Mr. Hurd: We are not directly involved in the main negotiations, but our view is clear. The first thing is to bring about the emergence of an effective Lebanese Government and the withdrawal of Israeli forces, as specified by the Security Council. It will then be for the Lebanese Government to decide future arrangements.

Mr. Marlow: Does my right hon. Friend agree with me that all hon. Members are reluctant to see aggression succeed? Is not the first priority to get the Israelis out of the Lebanon rather than to get the Palestinians out of Beirut, because they are there with authority? To that end, does my right hon. Friend agree that our European partners and many right hon. and hon. Members would be happy for us to participate in any peacekeeping force that might be necessary to restore authority to the Lebanese?

Mr. Hurd: There is a question on the Order Paper about a peacekeeping force. The first priority is to stop the killing in the Lebanon. That is why we support Mr. Habib's efforts.

Mr. Greville Janner: Does the Minister accept what the Prime Minister said in the House last week—that the best way towards the restoration of peace would be for the PLO to leave and that she very much hoped that it would? Does the right hon. Gentleman know, as I learnt only two days ago, that the majority of the Lebanese people regard the PLO as unwanted guests whose behaviour has been disgraceful and whom they want to see leave as soon as possible?

Mr. Hurd: I do not know how the hon. and learned Gentleman is able to judge the opinion of the majority of the Lebanese people. He will have noted that my right hon. Friend the Prime Minister also said that she found nothing in the justification for Israel's action which carried conviction.

Mr. Adley: If my right hon. Friend wants to check Lebanese opinion, I suggest that he might try the Lebanese ambassador for a start. Will he confirm that it is no part of Her Majesty's Government's policy to allow countries to dictate who their neighbours should be or the form of Government that should exist in neighbouring countries?

Mr. Hurd: That is right.

Mr. Healey: Will the right hon. Gentleman assure the House that neither he nor the Foreign Secretary will be deterred from expressing views about the current activity of the Israeli army round Beirut which may be similar to the views expressed by the Labour alignment—the main Opposition parties—in Israel? Is he aware that the majority of right hon. and hon. Members regard the sufferings of Lebanese men, women and children in Beirut as a serious offence against the principles of Zionism?

Mr. Hurd: The sufferings are great and the evidence of them is accumulating day by day. I agree with the right hon. Gentleman's sentiment.

Nicaragua

Mr. Deakins: asked the Secretary of State for Foreign and Commonwealth Affairs how many visits to Nicaragua have been made so far in 1982 by staff of the British embassy in San José; and if he will make a statement.

Mr. Onslow: Her Majesty's ambassador in San Jose has made four visits and members of his staff six visits to Nicaragua so far this year.

Mr. Deakins: In view of the serious economic problems facing Costa Rica, which must impose an extra work load on our ambassador in San Jose, and in view of the growing economic and social importance of


developments in Nicaragua for the whole of the region, will the Minister urgently reconsider the opening of a separate embassy in Managua?

Mr. Onslow: I am sorry to disappoint the hon. Gentleman, but I am satisfied that the present arrangements are adequate and that our staff can cover adequately the work load that is placed upon them.

Mr. Clinton Davis: Is the Minister aware that that is an extremely disappointing reply in view of the wholly changed circumstances in Central America over the past few weeks and months? On the few occasions that the ambassador has visited Managua, has he reported to the Government that the Nicaraguans made a constructive response to the invitation by the United States some months ago to enter into a dialogue with that Government? What influence are the Government bringing to bear on the United States to ensure that the talks take place at the high level that was envisaged originally?

Mr. Onslow: We have noted that both sides have expressed a willingness to hold talks. We hope that talks will take place and that they will contribute to an overall relaxation of tension. It must be left to the parties concerned to decide at what level the talks are conducted.

Lebanon

Mr. Lennox-Boyd: asked the Secretary of State for Foreign and Commonwealth Affairs whether discussions took place with the United States Administration during the visit of the Prime Minister to the United States of America on the possibility of British Armed Forces participating in a peacekeeping force in the Lebanon.

Mr. Hurd: During her visit to the United States my right hon. Friend the Prime Minister discussed the situation in Lebanon with the United States Administration and a possible peacekeeping force was mentioned. This possibility is still being discussed by those immediately concerned in the negotiations, but I understand that no conclusions have yet been reached. We have had no request for British participation in such a force.

Mr. Lennox-Boyd: Does my right hon. Friend agree that the American proposal to evacuate the PLO from Beirut requires the consent not only of the PLO and the two Governments most directly concerned, but of the Governments of the countries to which the PLO and their families are to be taken, which may be rather harder to achieve? Does he accept that this initiative must not be confused with the proposal to have a peacekeeping force in the Lebanon, which is distinct from it and likely to be an even more hazardous enterprise?

Mr. Hurd: My hon. Friend is right in what he said in the second part of his supplementary question. There are various proposals, but one of the difficulties, as he said, is that many parties have to give their consent to any one proposal before it can be effective. That is what Mr. Habib is trying to achieve. We support him in what is a difficult task.

Mr. Ernie Ross: Does the Minister agree that one of the difficulties facing the Palestinian Liberation Organisation in considering seriously the American offer to participate in the peacekeeping force is that the Lebanese and Palestinian peoples have been bombed and shelled by the Israelis with weapons that were supplied to

them by the Americans? The Palestinians might feel more inclined to consider seriously the American offer if the Americans were immediately to exert more discipline on the Israelis to ensure a ceasefire consistent with the words of the United States President.

Mr. Hurd: The Americans have been doing their best to prevent further fighting and killing in Beirut and its suburbs. The PLO is well aware of that. I hope that the PLO and all concerned will make an effort to make an arrangement which could bring the killing to an end.

Mr. Stokes: Does my right hon. Friend remember that Britain burnt its fingers badly over Palestine 40 years ago? Much as we all sympathise with the dreadful suffering in Lebanon now, will he ensure that the Government think carefully before sending any British forces there?

Mr. Hurd: We would have to be very careful, not least because of our heavy commitments elsewhere.

Mr. Moyle: Is the Minister aware that peacekeeping in Southern Lebanon will be a different process from peacekeeping in Sinai and that, therefore, if any British forces are committed, it must be with clear political authority and guidelines, and that the United Nations is probably the only organisation capable of that? Is the Minister further aware that there would be a need to strengthen the authority of the United Nations peacekeeping force, since no hon. Member would want any British Army, in whatever form, to be treated with the contemptuousness with which the Israeli army treated UNIFIL a month ago?

Mr. Hurd: An international force would have to depend on a clear mandate from the Security Council, which would be difficult to achieve, or on a clear request from the Lebanese Government as the legitimate Government of the territory. Neither is immediately in prospect.

South Africa

Mr. Proctor: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on United Kingdom relations with the Republic of South Africa.

Mr. Onslow: We have normal diplomatic relations with South Africa. In this context we continue to attach importance to the early attainment of an internationally recognised settlement in Namibia and to peaceful change in South Africa.

Mr. Proctor: Will my hon. Friend set out the Government's view about the proposed transfer of Ingwavuma from the Republic of South Africa to the Kingdom of Swaziland?

Mr. Onslow: We have no standing in that matter. What is likely to happen following the recent decision of the South African courts seems far from clear.

Mr. Healey: Will not the attempt by the South African Government to rob the Zulus of part of their homeland be bound to impede the process of peaceful change, to which the Government have just attached importance? Is that not especially so in the light of the fact that Chief Gatsha Buthelezi, the leader of the Zulus and the outstanding leader of those Africans who are free politically to express


their views in South Africa, has already warned that he will not seek to dissuade his people from violent resistance to such robbery?

Mr. Onslow: I note without comment what the right hon. Gentleman said. He will appreciate that territorial changes without the free consultation of the inhabitants concerned do not greatly commend themselves to us.

Mr. John Carlisle: Does my hon. Friend agree that relations between ourselves and Southern Africa would be improved vastly if we renewed sporting contacts and if they were encouraged by the British Government? Does he further agree that as so many sports there are completely racially integrated, the time has come to amend or abolish the Gleneagles agreement?

Mr. Onslow: My hon. Friend will know the origins and scope of the Gleneagles agreement. So long as South African laws and institutions are based on racial discrimination, that must be reflected in their participation in international sport.

Mr. Hooley: What practical progress is being made by the Western contact group on independence for Namibia? Has not the merry-go-round gone on long enough? Is it not time that the Western Powers brought some effective pressure to bear on South Africa to implement the plan which it agreed in principle two years ago?

Mr. Onslow: I am sorry that the hon. Gentleman does not recollect that when he last asked that question I told him that it was not our intention to hang about. There has been progress. If the hon. Gentleman has been following the reports, he will know that the Five have made good progress in resolving outstanding issues and that we are intensifying informal consultations with the parties concerned. A fresh series of meetings started in New York yesterday. I hope that they will move to a successful conclusion.

Falkland Islands

Mr. Douglas: asked the Secretary of State for Foreign and Commonwealth Affairs, if he will publish a White Paper on the implications for foreign policy of the events in the Falkland Islands.

Mr. Onslow: My right hon. Friend has no such plans at present.

Mr. Douglas: Does the Minister accept that that does not surprise me? Surely the Government cannot persist for too long with the posture of appearing to consider that the position in the Falklands can be status quo ante? Should we not have an assessment of our relations with the Americas as a whole, and in particular have regard to the United States assistance in maintaining freedom in the Falklands, if we are to be there for any time at all?

Mr. Onslow: Judging by the hon. Gentleman's preliminary remarks, I think that he understands the problem. Certainly what he said is likely to be true in the longer term. If there is to be a peaceful and secure settlement, it must involve the States with interests in that part of the South Atlantic. At some stage we shall want to move in that direction. I am not saying that our intention is to put sovereignty on the negotiating table. That apart, obviously we want to do our utmost to restore and improve still further our relations with other countries in South America. That is in hand.

Mr. Adley: Will my hon. Friend comment on the foreign policy implications of the Falkland Islands? As some people occasionally refer to the position in other British colonies as being identical to that in the Falklands, will my hon. Friend take the opportunity to make it clear that in regard to Hong Kong we have the best possible relations with the Peoples Republic of China? Does he agree that it is a false analogy to compare the position in Hong Kong with that in the Falkland Islands?

Mr. Onslow: My hon. Friend is right, as usual.

Mr. Dalyell: Since Ministers are so certain about what they call the undoubted rock-solid British claim to the Falkland Islands, why has it taken three weeks to give a substantive answer to the courteous letter that I wrote to the Foreign Secretary asking what Foreign Office lawyers have done since 1910 when they asked Gaston de Bernhardt of the Foreign Office research department to provide a memorandum on the legal sovereignty of the Falkland Islands? If the Government are so sure, could not the reply be sent quickly?

Mr. Onslow: I am sorry that the hon. Gentleman has not received the letter that I wrote to him yesterday explaining that these are complicated matters. We have somewhat better things to do than to go back to 1910 to answer letters from the hon. Gentleman. He must wait his turn while we deal with more important matters.

Lebanon

Mr. Latham: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the efforts being made by the Western Powers, through the good offices of Mr. Habib, to strengthen the authority of the Lebanese Government and bring about the withdrawal of external armed forces from Lebanon.

Mr. Hurd: It is clearly important to establish an effective and broadly representative central Government in Lebanon. In their statement of 29 June the Ten recognised that a final peace in Lebanon requires the withdrawal of all foreign forces, except those which may be authorised by a legitimate Lebanese Government. The Ten committed themselves to support all efforts in that direction, and that is what we are doing.

Mr. Latham: In the interests of the closest relations with our American allies, will my right hon. Friend clarify something that was not abundantly clear from his earlier answer? Do the British Government agree with and support President Reagan's offer to evacuate the PLO and send American troops there?

Mr. Hurd: There is a proposal, which has not yet been agreed by all concerned. It is a complicated proposal. It is not sensible to comment from here on a confused situation in which we are neither directly concerned nor prime actors.

Mr. Healey: In the confusion, it is far from clear what status the proposal reported in the newspapers has in relation to the American Government. Is the Minister aware that there seems to be opposition among many members of the Cabinet, and certainly among members of the Congress and Senate, whose authority would be required? Will the Minister assure the House that the British Government would impose the same conditions as


the French Government, as set out in a statement by the Quai d'Orsay yesterday, that such a force would have to be invited by the Lebanese Government, that it would have to be within the framework of the United Nations and that it would require the support of all the parties concerned?

Mr. Hurd: As I said in answer to a previous question, we have not been approached to participate in such a force. Therefore, I do not think that the questions put by the right hon. Gentleman arise for consideration by the British Government.

Mr. Wilkinson: Will my right hon. Friend make it clear that the Government do not wish to underpin the United States in their apparent effort wholly and uncritically to back the foreign policy objectives of the Israeli Government, as British public opinion believes that many innocent civilians are suffering unnecessarily out of all proportion to the understandable security policy objectives of Israel?

Mr. Hurd: The suffering inflicted by the Israeli invasion is probably greater than is realised in Britain. The United States is trying to bring the fighting and slaughter to an end. It must be supported in that.

Dr. M. S. Miller: Would it be easier for the Government if the Israelis not only withdrew from the Lebanon but ceased to exist in that part of the world?

Mr. Hurd: Of course not. The hon. Gentleman knows better than that. Israel has a right to exist in security, but that security will not be assured until the Israelis in turn recognise that the Palestianians have rights and that the continued denial of those rights is one of the reasons for contnued turbulence and suffering.

Invasions and Occupations

Mr. Adley: asked the Secretary of State for Foreign and Commonwealth Affairs which countries, having invaded and occupied other nations' territory, are currently in breach of United Nations resolutions that have been supported by Her Majesty's Government.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): Leaving aside Argentina's failure to comply with Security Council resolution 502, there are no mandatory resolutions regarding invasion and occupation of which United Nations members are in breach.

Mr. Adley: Can my hon. Friend confirm that the Government voted at the United Nations against the invasion and occupation by the Soviet Union of Afghanistan, by Vietnam of Cambodia and by Israel of the Lebanon and the West Bank? Will he confirm that that remains the Government's position and that foreign policy will be structured to take account of those circumstances?

Mr. Rifkind: My hon. Friend is correct. The United Kingdom Government did act in that way. They were not mandatory resolutions and therefore the countries concerned are not technically in breach of them. The Government's policy remains as my hon. Friend stated it.

Mr. Foulkes: Does the hon. Gentleman agree that Morocco illegally occupied the north-western part of the Western Sahara against the stated wishes of the United Nations? Will the Government consider taking a positive

initiative to encourage mediation between Morocco and the Western Sahara so that the dispute can be settled peacefully?

Mr. Rifkind: The Government hope that Morocco and her neighbours will resolve that problem amicably. A United Kingdom initiative is not intended at this stage.

Mr. Squire: Will my hon. Friend note that this month marks the eighth anniversary of the invasion of Cyprus by Turkish forces? Will he confirm that it remains the Government's urgent intention that Cyprus be reunited as one people and that all military forces be removed?

Mr. Rifkind: That would be an ideal solution if it could be achieved in a way that was acceptable to the people of Cyprus. In reality, however, one must accept the serious problems involved in trying to achieve that outcome.

Mr. George Robertson: In view of the importance of Security Council resolution 502 to Britain's case in the Falkland Islands, what steps are the Government taking to increase the authority of the United Nations so that similar ventures might be prevented by peaceful means rather than by recourse to the self-defence provision of the United Nations charter?

Mr. Rifkind: It is highly desirable for countries to observe mandatory United Nations resoulutions. Unfortunately, we must accept that Argentina refused to do so. That is why the United Kingdom had no alternative but to take the action that she did.

World Cup (Arrests)

Mr. R. C. Mitchell: asked the Secretary of State for Foreign and Commonwealth Affairs how many United Kingdom subjects have been arrested in Spain since the commencement of the World Cup.

Mr. Rifkind: Between 13 June and 6 July, 111 United Kingdom citizens were arrested in Spain. All but 11 were released shortly afterwards. Only two of those still in custody appear to have travelled to Spain to attend World Cup football matches.

Mr. Mitchell: Has the hon. Gentleman seen press reports of British citizens who are in Spain, some for the World Cup and others on ordinary family holidays, being attacked and harassed by groups of young Spaniards without receiving police protection? Have the Government made any representations to the Spanish authorities? If so, what replies have been received?

Mr. Rifkind: We have seen those reports and are worried by them. Her Majesty's ambassador in Madrid is asking the Spanish authorities for further information about the incidents. The deputy mayor of Madrid, who is responsible for police matters in the city of Madrid, has initiated an inquiry into the incidents. He has expressed his anxiety at the reports that he has received. There is no doubt that the Spanish authorities are equally worried about the incidents in question.

Mr. Aitken: Is my hon. Friend aware that many people will have been horrified by the scenes shown on television recently of Spanish police officers making apparently vicious and unprovoked truncheon attacks on football fans? Will he ensure that the film that was taken by the


BBC and ITV can, if necessary, be made available to the Spanish authorities to carry out an investigation into the disgraceful episode?

Mr. Rifkind: We shall do what we can to assist the Spanish authorities with their inquiries. Not only do the Government regard the events with grave concern, but there is every indication that the Spanish authorities are also worried about what may have happened.

Mr. J. Enoch Powell: What were the objects, and what have been the results of, the official visit of the Secretary of State for Northern Ireland to Madrid?

Mr. Rifkind: My right hon. Friend visited Madrid more in a personal capacity. He appears to have found his visit enjoyable.

Women (Discrimination)

Miss Joan Lestor: asked the Secretary of State for Foreign and Commonwealth Affairs when he expects to have completed his consideration of whether the United Kingdom should ratify the United Nations convention on the elimination of discrimination against women.

Mr. Rifkind: We expect to be able to take a decision in respect of the United Kingdom soon. If it is confirmed that we can ratify in respect of the United Kingdom, it will then be necessary to consult the Channel Islands, the Isle of Man and the dependent territories to establish whether they would wish our ratification of the convention to apply to them.

Miss Lestor: Is the hon. Gentleman aware that that reply is similar to the one that was given in another place about five months ago? Is he further aware that we are now eight-tenths of the way through the United Nations decade for women and that 39 member States have already signed the convention? In view of the extensive discrimination against women that still exists in Britain, does the hon. Gentleman agree that it is of the utmost importance that it be signed as soon as possible?

Mr. Rifkind: The Government would like to make all due progress in the matter. The hon. Lady must appreciate that the original convention was drafted with some haste and that that has led to additional problems in our consideration of its terms for ratification purposes. Few European countries, indeed none of our Community partners, have yet felt able to ratify it.

Mr. Jessel: Since the hon. Lady succeeded in being elected to the House without Britain having ratified the convention, why should we now want to sign it?

Miss Lestor: Pathetic!

Mr. Rifkind: Irrespective of the hon. Lady's achievement in breaking through some of the traditional examples of discrimination, there is a school of thought that not all ladies have such complete freedom. That is what those who advanced the convention had in mind. We wish to take into account the legal implications of the convention for the United Kingdom before deciding whether ratification would be appropriate.

Poland

Mr. David Atkinson: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the situation in Poland.

Mr. Rifkind: Her Majesty's Government deplore the continuing failure of the Polish authorities to live up to their declared intention to return to the path of renewal and reform. We shall continue to urge the Polish Government to lift martial law, release all those in detention and restore a dialogue with the Church and Solidarity. In the absence of any real progress towards those objectives, our present measures in respect of Poland must remain in force.

Mr. Atkinson: Does my hon. Friend agree that we tend to forget Lech Walesa and the 2,000 Solidarity leaders who have been in prison since last December at the Kremlin's behest? Will my hon. Friend give an assurance that no concluding documents of the Helsinki conference at Madrid will be signed until those people are released?

Mr. Rifkind: Far from the British Government and other Western countries forgetting the detainees, we have made their release, and that of Lech Walesa, one of our principal requirements if the Polish and Soviet Union Governments wish for a return to normalisation of our relations with Poland. Events in Poland will be an important consideration when trying to achieve an agreement at the Madrid conference.

Mr. George Robertson: In the light of the understandable anxiety about the Polish authorities' unwillingness to move towards ending martial law, what is the state of negotiations about rescheduling Polish debts?

Mr. Rifkind: The commercial banks are now negotiating with the Polish authorities. Western nations have said that they do not intend to initiate negotiations with Poland about rescheduling debts. That remains our policy.

Lord James Douglas-Hamilton: Is my hon. Friend aware that there have been reports that some members of Solidarity have been taken involuntarily out of Poland? Will he make inquiries about that, as the people concerned may have connections in this country?

Mr. Rifkind: I have heard suggestions to that effect, although we have not yet been able to confirm the rumours. Certainly any movement of detainees to other countries, or attempts to put pressure on them to emigrate from Poland, would be viewed by the Government as matters to be condemned.

Oral Answers to Questions — EUROPEAN COMMUNITY

European Parliament (Members' Expenses)

Mr. Jay: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will ensure that the Council of Ministers considers the report by the EEC Court of Auditors concerning the expenses of Members of the EEC Assembly.

Mr. Hurd: The report was addressed to the European Parliament, as the Parliament administers its own budget. The President of the Parliament has announced his intention to correct any irregularities identified in the report. I hope and believe that he will.

Mr. Jay: As British taxpayers' money is involved in paying for the EEC, what action are British Ministers taking to check the disreputable financial practices of some Members of the Assembly, which are discrediting the entire institution?

Mr. Hurd: That is a matter for the European Parliament, and the President is obviously active in seeking to clear it up. The right hon. Gentleman will probably agree that the real sanction in this matter is not the views of Ministers but the views of the electorate. That is probably the more powerful sanction.

Mr. Body: Will my right hon. Friend confirm that those Assembly people receive an allowance of £19,000 per year for their secretaries and an allowance of 35p per mile for travelling around their constituencies? If that is so, is there any need for fiddling?

Mr. Hurd: I cannot answer for the figures for the allowance, as they are fixed by the European Parliament itself. Salaries are a matter for the Government and therefore for this House and, as my hon. Friend knows, the salaries are the same as our own.

Mr. Heffer: Has the right hon. Gentleman noted that some so-called MEPs are likely to lose £4,500 per year under the new proposals, and quite rightly so, and that, at the same time as arguing about their financial position, they agreed by 257 votes to 37 that the powers of the organisation should be increased and that it should supposedly be made into a proper Parliament? Will the right hon. Gentleman assure the House that at all stages the Government will oppose any propositions of that kind?

Mr. Hurd: I gave the hon. Gentleman that assurance in the debate on the powers of the Parliament and related matters about a week ago.

United Kingdom Interests

Mr. Dykes: asked the Secretary of State for Foreign and Commonwealth Affairs if he proposes any new initiatives within the European Economic Community to protect the United Kingdom's economic and political interests.

Mr. Hurd: We intend to identify and pursue all sensible opportunities to advance our economic and political interests through proposals in the Community.

Mr. Dykes: Will my right hon. Friend press for the location of EEC institutions in the United Kingdom in the coming years and will he suggest which ones they might be?

Mr. Hurd: Not without notice, but if sensible proposals—I stress the word "sensible"—for new Community policies are put forward it is important that there should be proper distribution of benefits in terms of siting.

Mr. Roy Hughes: Will the Minister impress upon the Community how anxious we are to attract the Datsun project to this country? Does he agree that it would be far better to have a Japanese car plant in South Wales, for example, bringing its expertise to our motor industry as well as providing many thousands of jobs, than for our roads to continue to be flooded with the Volkswagens, Renaults and Fiats, which have done so much to undermine our own industry?

Mr. Hurd: I note the hon. Gentleman's point about the Nissan project, but I think that it is essentially a matter for the Japanese rather than for the Community.

Mr. Roper: Reverting to the installation of EEC institutions, will the right hon. Gentleman consider the siting of the EEC copyright office in the Greater Manchester area?

Mr. Hurd: Yes, Sir.

Mr. Budgen: Do the Government intend to deny the EEC institutions any proposals that they might have to extend their sources of new revenue?

Mr. Hurd: We hold at present to the belief that it would be wrong to enlarge the 1 per cent. limit on VAT. As the whole question of own resources is not immediately or imminently on the Community agenda, I had better not add to what I have said.

Mr. Heffer: Does the Minister agree that the budget issue is still outstanding, that the CAP has not been fundamentally changed and that no moves have been made towards a looser and wider Europe? Would not the best initiative for the Government be to begin the process of getting Britain out of the Common Market at the earliest possible moment?

Mr. Hurd: I think that that would be a thoroughly negative and destructive step, and I note that the hon. Gentleman's colleagues are increasingly sceptical about it.

Mr. Heffer: Which ones?

Mr. Hurd: The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made an interesting statement in the last few days.

Mr. Heffer: He was not speaking for the party.

Luxembourg Compromise

Mr. Farr: asked the Secretary of State for Foreign and Commonwealth Affairs if Her Majesty's Government will make it their policy not to apply any future decision taken by European. Economic Community Ministers where the unanimity rule under the terms of the Luxembourg compromise is breached.

Mr. Hurd: As my right hon. Friend told the House on 22 June, the discussion by. Foreign Ministers on 20 June showed that five member States support the view that decisions should be deferred where a member State considers its important national interests to be at stake My right hon. Friend has made very clear how serious it would be if this practice were not applied in future, as it had been up to 18 May. We shall have to see how things go.

Mr. Farr: I thank my right hon. Friend for that reply. Does he agree that a number of critical negotiations are currently taking place, not least those relating to our fisheries and to the common fisheries policy? Is it good enough to have this indecision, which might lead to the same kind of scandalous decision as was taken at the Agriculture Ministers' meeting being taken at many other more critical meetings in the future? Will he give attention to the problem and see whether it can be straightened out?

Mr. Hurd: Of course we must keep an eye on it, but the position is that the Luxembourg compromise was an agreement to differ, with five States on one side of the argument and one on the other. The present position is that five States now agree broadly with our interpretation and five do not, so the position is not very different from what it was before.

Mr. Spearing: As the Minister has now said that the Luxembourg arrangement was an agreement to differ, are not the terms on which the referendum was conducted in 1975, and on which he and his hon. Friends campaigned, shown to be false in relation to the claim about the veto?

Mr. Hurd: What was said by different Governments about the Luxembourg compromise was truthful namely, that it was the arrangement by which the Community actually took its decisions. The hon. Gentleman will accept that. That convention broke down on 18 May. We believe that it is very important that it should be restored to proper working. What counts is what actually happens in the taking of decisions in the Community from now on.

Sir John Biggs-Davison: Will the Government use the unanimity rule or convention to maintain the right of New Zealand to export to the United Kingdom?

Mr. Hurd: This matter will be the subject of important discussions starting in the autumn. I note the Commission's recent proposal. This is certainly a matter on which there should be no doubt, and I believe that there is no doubt on the part of our New Zealand friends about our determination to defend their interests.

Mr. Donald Stewart: Will the Government call off the current negotiations on a common fisheries policy, because if the Luxembourg compromise is not operating we shall have no chance at all of any kind of settlement? Many of us believe that it will be a sell-out in any case, but does the Minister agree that if the country with the fish cannot defend itself in any way the position will be utterly hopeless?

Mr. Hurd: The right hon. Gentleman ignores the fact that in recent weeks we have made substantial progress towards a settlement of this enormously difficult and important subject, which my right hon. Friend the Minister of Agriculture, Fisheries and Food and, I understand, the spokesmen for the industry, think would be satisfactory. One member State, Denmark, is opposed to the settlement. We hope that the next Fisheries Council, to be held under the Danish Presidency, will produce decisive progress.

Mr. Guy Barnett: I accept that the Luxembourg compromise was a convention, but does the right hon. Gentleman recognise the vital part that it played in the country's decision to join the EEC? In the light of that, will the Minister accept his hon. Friend's very good suggestion that the British Government should make it clear that we will not implement anything that is passed when the Luxembourg compromise is overruled?

Mr. Hurd: My right hon. Friend the Foreign Secretary has made perfectly clear our belief as to how future decisions of the Community should be taken—that is, on the basis of the convention that operated without exception until 18 May. So far that has not been breached again and, as I have said, what counts is how decisions are taken in future. We have left our European partners in no doubt about the seriousness of the issue.

Mr. Bill Walker: Can my right hon. Friend give the Government's views on the proposals of the European Parliament to give large sums of money to political parties, including parties in this country, to fight elections—

Mr. Speaker: Order. That is another question altogether, different from the one that we are dealing with. [Interruption.] It is a different question from the one on the Order Paper, which we can all read.

Foreign Policy

Mr. Knox: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress towards a common European Economic Community foreign policy.

Mr. Hurd: I refer my hon. Friend to the statement made by my right hon. Friend the Prime Minister on Thursday 1 July about the European Council. Foreign Ministers of the Ten also met in political co-operation on 9 and 21 June. Recent events show how important foreign policy co-operation now is for the member States of the Community.

Mr. Knox: Will my right hon. Friend confirm that he is giving the highest possible priority to the creation of a common EEC foreign policy?

Mr. Hurd: The Ten Governments retain sovereignty on foreign policy matters and I believe that they wish to do so in future. More and more common positions on individual issues are reached by consensus, and that increases the influence that each country has in the rest of the world.

Mr. Campbell-Savours: Does the Minister agree that the conflict in the Middle East offers the Government an ideal opportunity to forge that common policy arrangement? Despite his reply to me recently in a written answer about the Middle East, will he refer the matter back to the Ten and seek an initiative so that we can enter Ramallah prison to ascertain the extent of the maltreatment of the Palestinian people there by the Israeli authorities?

Mr. Hurd: In the past few weeks the Ten have taken up a whole range of humanitarian questions with the Israeli Government—getting aid through, the treatment of prisoners and so on. In each case we must judge whether approaches are likely to be successful.

Mr. Moate: Will my right hon. Friend make absolutely clear whether the Government believe in a Common Market foreign policy—or would he prefer to make it clear that the Government foresee a separate British voice speaking in the councils of the world and that British foreign policy will never be articulated by a Community spokesman based on a Community compromise? —

Mr. Hurd: I have already said that the Government—in common with all member States—retain their sovereignty to speak their mind on foreign policy matters. Increasingly we find that, to be effective, it is useful to reach agreement within the Ten and speak with one voice.

Mr. Deakins: Does the Minister recognise that political co-operation is not the same as a common foreign policy? The Minister is in favour of political co-operation, like many hon. Members on both sides of the House, but most hon. Members are not in favour of a common foreign policy.

Mr. Hurd: The hon. Gentleman is wrong if he believes that the one would survive without the other.

Reform

Sir Anthony Meyer: asked the Secretary of State for Foreign and Commonwealth Affairs what progress he has made in pursuit of his policy to achieve any reforms within the European Economic Community.

Mr. Hurd: There has been a reduction in the CAP's share of Community expenditure and an increase in the United Kingdom's receipts from CAP expenditure. We have reached agreement with the Parliament on the classification of expenditure. We are making some progress with our efforts to remove barriers to trade in the Community's internal market for goods and services, including insurance, and also in the negotiations for a common fisheries policy. We have secured substantial refunds of the United Kingdom net contribution, and decisions on future arrangements should be taken by the end of November. There is much still to be done in these and other areas.

Sir Anthony Meyer: I thank my right hon. Friend for that full answer. I accept the Treasury diktat that there can be no increase in the 1 per cent. contribution, even though an increase would be to the net benefit of the United Kingdom. However, will my right hon. Friend consult his colleagues in other Departments on the proposal put forward by the European Commission for a revision in budget contributions—notably for some kind of tax on imported sources of energy? Will he also have consultations regarding a more progressive system for applying VAT contributions? Both proposals would clearly be in the interests of the United Kingdom.

Mr. Hurd: We have noted these ideas, which have been going the rounds for some considerable time, but they are not specific proposals and I do not wish to pronounce on them today.

Mr. Ioan Evans: One of the reforms mentioned in a previous answer was a common foreign policy. Will the Minister put details of the common foreign policy in the Library, as he is unable to enunciate them in the House?

Mr. Hurd: There is not a common foreign policy. We retain our sovereignty—[HON. MEMBERS: "Ah!"]. For the third time, we retain our sovereignty to make our own foreign policy decisions, but we increasingly seek cooperation to make our foreign policy more effective.

Sir David Price: Does my right hon. Friend agree that the most urgent reform needed within the Community is to persuade other member Governments to comply with their obligations under the Treaty of Rome? Is my right hon. Friend aware of the total non-compliance by Germany, Italy and France with the insurance aspects of free trade? Does he realise that our insurers are being obstructed at every stage in those countries?

Mr. Hurd: It is certainly true that progress on insurance has been disappointingly slow. A directive on non-life insurance co-operation was discussed six times by the Finance Council last year, and again last month. It is very much in Britain's interests that the discussions should succeed and we shall pursue them energetically.

Mr. Heffer: Will the right hon. Gentleman give a real answer to the question on foreign policy? Was it the answer given to his hon. Friend the Member for Faversham (Mr. Moate) earlier, or the answer that he has

just given? Will the right hon. Gentleman give a clear assurance that, irrespective of political co-operation—I am not opposed to that in Europe—Britain will determine its own foreign policy, in its own interests and on behalf of the British people?

Mr. Hurd: I have given that assurance three times and I am willing to give it for the fourth time.

Luxembourg Compromise

Mr. Squire: asked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied that progress is now being made which will ensure that voting arrangements within the European Economic Community will suffice to protect vital interests in future.

Mr. Hurd: When the Foreign Ministers discussed this question on 20 June, member States supported the principle that decisions should be deferred where a member State considers that its important national interests are at stake. In the light of this discussion, he Government expect that the practice that the Community has followed with one exception since 1966 will continue to operate.

Mr. Squire: Will my right hon. Friend confirm that, provided a satisfactory definition of "vital national interest" can be agreed, this country continues to have more to gain from majority voting—not least in the circumstances advanced by my hon. Friend the Member for Eastleigh (Sir D. Price) a moment ago—than it can by insisting on all decisions being made unanimously?

Mr. Hurd: There are occasions when, without any controversy, decisions have been taken by majority voting. However, my hon. Friend will no doubt agree that a community of nation States cannot effectively work except on the basis that where a member State believes that important national interests are involved it should have the right to say that a decision must be deferred.

Mr. Cryer: Is it not the position that this country entered the Common Market following a referendum decided on the basis that a veto would exist if the country's national interests were at stake? That convention has been broken and, therefore, there has been a breach of the constitution. If that breach cannot be repaired, does the Minister agree that the only way that we can be honest with the people is to give them the opportunity to get out of the Common Market?

Mr. Hurd: If the Opposition make that an election issue, it will be an election issue. That is up to the Opposition. The statement of the convention was accurately made at that time, and it applied until 18 May. We should have liked to see a clear-cut statement on the future, but we have achieved an agreement to differ—essentially the same as the Luxembourg compromise. We believe that it is on that basis that future decisions should be taken.

Mr. Parris: Does my right hon. Friend agree that the fact that we have rot been overruled again since the farm price issue does not mean that the problem has not arisen again, as we may have been more reluctant to pursue our interests uncompromisingly because we were afraid of being overruled?

Mr. Hurd: I do not think that that is so. In fact, I cannot think of any example where that could even be suggested.

Mr. Faulds: On a point of order, Mr. Speaker. Do you know of any other hon. Member who during the last hour, has failed to catch your eye on seven different questions?

Mr. Speaker: I think that only one other hon. Member rose in his place on seven questions.

Water Industry (Reorganisation)

The Minister for Local Government and Environmental Services (Mr. Tom King): With permisssion, Mr. Speaker, I should like to make a statement on the future organisation for water in England and Wales.
The regional water authorities were set up in 1974 with large memberships, the majority of such members being appointed by local authorities in their areas. The original intention was that these members should represent the interests of consumers. There has for some time been concern that this system is not working as intended. Consumers have not felt that they were really represented and few people knew who their representatives were on the water authority. At the same time, large memberships have led to a proliferation of committees and bureaucracy and inhibited efficient decision taking. The Monopolies and Mergers Commission, in its report on the Severn-Trent water authority, recommended that the present membership should be substantially reduced and not based predominantly on local government representation. The Welsh water authority has already been reconstituted on these lines. Earlier this year we issued a consultation paper for England on this question.
The regional water authorities are substantial undertakings requiring a high level of management ability. Having considered the responses to the consultation paper, the Government have decided to create smaller boards of between nine and 15 members, appointed by Ministers and including executive members on every board. We propose that county and district councils should have the opportunity to nominate people for some appointments to these boards. In addition, land drainage and fishery interests will continue to be represented. Chairmen and members of the new boards will be paid, and will serve for fixed terms.
Together with these new boards improved arrangements can then be made for consultation with consumers, local authorities, and other interested parties. Water authorities have already established various kinds of liaison arrangements at divisional level, and we intend to build on these.
Our proposal is that water authorities should appoint an advisory committee for each division, which would include representatives of local authorities but also representatives of industrial, commercial and domestic consumers, and agricultural and amenity interests. We shall issue guidelines for the estabishment of these committees, and will require the water authorities to satisfy us that proper arrangements have been made.
In considering the structure of the water authorities, we have also examined their relationship with the National Water Council. The National Water Council played a valuable role following reorganisation in assisting the new authorities and helping to represent them to the Government. They are now fully established and the Government have developed a more direct relationship with the individual authorities. The Government therefore believe that they are able to carry out their responsibilities without an additional central statutory body. We have therefore decided to dissolve the National Water Council.

We shall be consulting those affected by this decision, including the trade unions. The Water Space Amenity Commission will also be dissolved.
The legislation which will be required for these changes which cover both England and Wales will be introduced at the earliest opportunity.
We believe that these proposals represent an improvement in the arrangements for the organisation of the water industry, and that they will command wide support both among consumers and in the water industry itself. I commend them to the House.

Mr. Denis Howell: Why have the Government decided to treat the House with such contempt? When the major proposals for the Water Act 1973 were being formulated they were put to the House in a Green Paper and White paper and the House was given an opportunity to debate them. When the previous Administration issued their White Paper in 1977, they followed the same procedure. Were the Government so ashamed of what they were doing that the House could not even be consulted before this announcement was made?
Do not these proposals result from considerable national concern about the level of water charges, which gave rise to angry debate throughout the country, led by local authorities—which is no doubt why they are now being killed off? Even at the Conservative Party conference in 1980 the right hon. Gentleman made a brave speech, during which he talked about faceless, remote water authorities.
Is it not a fact—if I am wrong, perhaps the Minister will give the facts—that nothing m these proposed changes will reduce water charges to the consumer by a penny? That is what all the agitation has been about.
Why have the Government decided to eliminate local democracy in the water industry? Why do they carry on this vendetta against local authorities of all political persuasions? Why do they believe that it is better to replace that democracy by a system of corporate centralism, the like of which we can expect to find only behind the Iron Curtain or in other totalitarian States?
Will the right hon. Gentleman confirm that every regional water authority and local authority association that was consulted about these proposals was opposed to them? In that case, why are the Government ignoring those views?
The National Water Council is to be dissolved, but the statement was unsatisfactory and silent on some matters that are of great concern to the nation. I mention three. The first is the level of national investment policy. When so much of our creaking system, particularly the sewerage system, needs to be replaced, who will decide the total programme? Why have we not been told how that will be done?
National wage negotiations can be conducted only by the National Water Council. It is important that we should know how wage negotiations in the water industry will be conducted, but the Minister said nothing about that or about quality control, which is equally important.
Why will the consumers and local authorities have no representation, when the undemocratically constructed internal drainage authorities are to have a seat as of right? That cannot be right, and it is another blow to local authority representation.
The Government propose a system of advisory councils for consumers and local authorities which will be selective


in make-up and which has proved unsatisfactory in all our nationalised industries. These proposals are retrograde in every respect and will be opposed by the Opposition.

Mr. King: The right hon. Gentleman said that the statement was silent about the investment programme. It deals with the structure of the industry and the investment programme will continue as it is now, with discussions between individual authorities and my Department.
The right hon. Gentleman also referred to the importance of national wage negotiations. That is the principal function of the National Water Council and it will be necessary to make suitable alternative arrangements. As I made clear in my statement, the change requires legislation. The National Water Council will continue until well into next year, depending on the legislation programme. It will be a matter for discussion, and this afternoon we are issuing a consultation paper on the alternative arrangements which will be available to all hon. Members.
There will be some savings in charges, because the National Water Council involves certain costs, but it will depend upon the alternative arrangements. The council employs about 450 people, some in training, fittings and pensions, which will need—

Mr. Nigel Spearing: To continue.

Mr. King: —to continue, but economies can be made in other areas. The water authorities also incur considerable costs in their committees. The National Water Council used to operate more than 100, but that number has recently been reduced. However, the individual authorities still have a large work load because they must come to London for committee meetings. I know that some of them believe that economies could be made there.
It is not correct to accuse the Government of corporate centralism when, first, we refused to go down the line adopted by the right hon. Gentleman of a national water authority with all-pervasive powers and when we are now abandoning the corporate centralism of which he accused us in favour of more decentralisation to regional water authorities.

Sir Marcus Kimball: Is my right hon. Friend aware that the smaller and strengthened executive that he has just announced will go a long way towards meeting the criticism of large water authorities so often voiced by Conservative Members? Does he agree that the smaller divisional units will at least be sensitive to local pressures?

Mr. King: I am grateful to my hon. Friend. I believe genuinely that the previous arrangement was an attempt to meet both problems in one body. It led to real problems, as shown by the Monopolies and Mergers Commission which, in the Severn-Trent water authority, identified a sum of about £1 million that was attributable to the size of the membership and the paper work involved in servicing committees. It will now be possible to include many more consumer representatives who can get across their points of view.

Mr. Stephen Ross: Is the Minister aware that, of the five options that appeared in the discussion paper, none of which was satisfactory, he has

chosen the worst? What is wrong with direct elections to the water authorities? Why cannot the public elect members? Is not his example of what happened in Wales very much regretted and resented there?

Mr. King: That view is advanced in some quarters, but I have never believed that there would be wide support for directly elected water authorities. They are substantial undertakings that require considerable commercial management skills in their operation, and direct elections to them would not be effective.

Mr. Spearing: Does not the first part of the Minister's statement show that either the 1972 Government, who introduced the previous reforms, have failed in their purpose, or that many local representatives, including Conservative representatives, have failed in their purpose since then? Does he agree that, apart from the functions that he mentioned in reply to my right hon. Friend the Member for Birmingham, Small Heath (Mr. Howell), many functions require national planning of water resources and disposal and that they are not best carried out by his Department in Marsham Street, where history has shown that civil servants, by their background, know little about water and its importance?

Mr. King: The basic reform in the Water Act 1973 was to convert about 1,600 bodies responsible for water supply, treatment and sewerage into 10 water authorities based on the river basin concept. That fundamental reform has been proved right.

Mr. Michael English: It is not based on river basins in the Midlands.

Mr. King: It is based on two river basins—the Severn and the Trent.

Mr. English: He does not even know the background.

Mr. King: The original concept, which is not the world's greatest secret, was along the lines that I announced. It was subsequently amended in the face of local authority opposition. On reflection, we believed it best to revert to the original concept.

Mr. Kenneth Lewis: Although I appreciate my right hon. Friend's real attempt to strengthen and streamline the management of water authorities, is he aware that the greatest criticism of those authorities has been that they do not include local representation? If the advisory bodies are weak against the strengthened management, the position could not be improved but might be worsened.

Mr. King: I accept entirely what my hon. Friend says. It is important to ensure that the advisory bodies are effective. I accept that that approach has been criticised in the past, but it is extremely difficult for organisations of that size—the Thames water authority has 11½ million customers—to ensure that we have effective management—

Mr. Spearing: They have just reorganised themselves.

Mr. King: —and effective consumer representation. We shall issue guidelines to the water authorities and we shall not allow matters to proceed until we are certain that consumer arrangements are satisfactory.

Mr. Peter Hardy: Does the Minister agree that his announcement is premature, because he has


not given the water authorities time to reconsider their position in the light of recent evidence? To some of us, it looks as though the Government are about to go along a rather sordid road. Does he also accept that the future of the water industry should depend rather more on the Government considering the need to increase capital expenditure than on their obsession with tinkering with its structure?

Mr. King: It is important correctly to identify the needs of the industry. Those needs are different in different parts of the country. The North-West water authority would put collapsing sewers and derelict underground assets at the top of its list of priorities. In the hon. Gentleman's area, the quality of water is a problem. It is important not to try to deal with the problems globally but to identify them in each authority. Structure and value for money in investment go hand in hand.

Mr. John Cartwright: Does the Minister accept that consumers suffer from taxation without adequate representation? Does he agree that we should increase and not reduce accountability? Why does he rule out direct election in favour of creating yet another bureaucratic tier of divisional advisory committees?

Mr. King: If one distinguishes between electricity and gas, and water, one immediately draws attention to the fact that the major part of water supply is based on the rateable value and not on the amount consumed, measured by meter. There are some tentative signs that that is changing. The number of domestic consumers whose water supply is metered has doubled, although it is still extremely small. Directly elected bodies would not answer our problems. That was an alternative proposition, but we believe that this is the proper solution.

Mr. Den Dover: Is it not true that business pays more than half the water rates? Does my right hon. Friend accept that business men will welcome the new divisional arrangements? Will my right hon. Friend the Secretary of State give due consideration to appointing business men to the water boards?

Mr. King: My answer to both questions is "Yes". We shall certainly need people with commercial and industrial abilities on the boards because they are major undertakings. The nine authorities in England and one in Wales are responsible for £750 million to £800 million of capital investment every year, plus more than £2,000 million of revenue expenditure.

Mr. David Ennals: Bearing in mind the political axemanship of the right hon. Gentleman's colleague, the Secretary of State for Social Services, when he sacked the chairmen of regional health authorities who dared to disagree with him, is it not ominous that he is introducing a similar political approach to water authorities? Why does he deny any representation to local authorities, which will deeply resent that, and when will the House be able to debate this package of proposals which the Opposition find totally unacceptable?

Mr. King: The right hon. Gentleman has heard my statement. These proposals will require legislation and a full examination by the House at that time. I found his preliminary remarks extraordinary.

Mr. Teddy Taylor: Does this major money-saving reorganisation have any implications for

places such as Southend where the water provision is subcontracted to private commercial companies? In Southend, that is the Essex water company.

Mr. King: My statement does not affect the position of the water companies—the statutory undertakers—in their areas. It deals purely with the structure of the water authorities.

Mr. English: We all understand that all Governments wish to provide jobs for their supporters. Will the Minister ensure that there is a maximum age for members beyond which he cannot appoint? Nobody above the retiring age of civil servants should sit on such authorities. The last quango appointed by the Government has an average age of 67 years. Water is rather more important than the history of the Falkland Islands.

Mr. King: There will be a considerable reduction in the number of appointments and the number of members on water authorities. The age of members will arise during legislation.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call the five hon. Members on both sides who have been rising throughout questions on this statement.

Mr. Toby Jessel: What will the effect be upon the River Thames, both on the tidal area below Teddington lock and the non-tidal area above it, on the flow of traffic along the river on the moorings, on the management and on the quality of the water?

Mr. King: I should need notice of that question to say exactly how my statement will affect the River Thames. I hope that my hon. Friend and his constituents will see an improved performance by the authority and a more accountable authority.

Mr. Andrew F. Bennett: Will the Minister accept that most of my constituents resent the water authorities because of their remoteness, bureaucracy and charges? The Minister's proposals do nothing to help. He should return them to local democracy and alleviate the hardship caused by the charges by introducing a rebate system for pensioners and others on low incomes who cannot afford the extremely high water rate charges.

Mr. King: It is an interesting fact, as the hon. Member knows, that his water authority has one of the lower levels of charges in the country, although it has some important responsibilities to tackle. When the hon. Member used that rather easy phrase "return them to local democracy", I was not clear whether he meant returning to the system under which 1,800 bodies were responsible in different areas. These problems have to be looked at seriously and we believe that our proposal is a serious and sensible attempt to achieve the right balance.

Mr. Roger Moate: Can my right hon. Friend confirm the impression that one has, that the majority of those who responded to his consultation document wanted to retain some direct local authority representation? If that is not so, will he comment on the nature of the responses that he received? I recognise the difficulty of reforming a bad system but has my right hon. Friend not fallen into the trap of converting what were semi-quangos into complete quangos?

Mr. King: The majority of responses received were from local authorities and water authorities. Because one


of the proposals involves the diminution of numbers on the authority the majority of local authorities, but not all, were not in favour of the reduction. We had a similar response from the water authorities where local authority members are in the majority. The majority of outside bodies which responded were in favour of smaller boards with advisory committees. Advisory committees will be appointed by the water authorities. They will not be Government appointments, although they will be made under my guidelines.

Mr. Bob Cryer: It appears that the Minister's proposals will save a few train journeys to London. It seems absurd to remove all vestiges of local authority and consumer participation to achieve that. There is a strong suspicion that the Minister is setting up a few quangos to put Tory placemen on them who will say "Yes" to central Government and shift the power to his right hon. Friend the gauleiter of Marsham Street. Is that not the position?

Mr. King: I am surprised by the hon. Gentleman's intervention. He seems unaware of the public anxiety that exists at the remoteness of the water authorities and the lack of opportunity for consumer involvement and representation. We believe that this attempt will improve the position.

Several Hon. Members: rose—

Mr. Speaker: Order. I want to make it clear that I propose to call only those hon. Members on both sides whom I said earlier had been rising in their places.

Mr. Michael McNair-Wilson: rose—

Sir David Price: On a point of order, Mr. Speaker. Does that apply when a new fact has emerged from the Minister?

Mr. Speaker: Yes, I am afraid it does, or we should go on for ever.

Mr. McNair-Wilson: Will my right hon. Friend say something more about the accountability of the new regional authorities? Are they to be effectively autonomous in the way in which they handle the problems of their areas or are they to be answerable to him? If they are to be answerable to him, will he be answerable to the House for the way in which they conduct their business?

Mr. King: Yes, Sir.

Mr. Dennis Skinner: Will the Minister tell us whether, 24 hours after the Leader of the House made a statement about giving power back to the people, this Tory proposal for water authorities falls into that category, as the Secretary of State will arrogate all that power? Is it not ironic that the Government and the Secretary of State talked about quangos when they were elected to office yet they have now set up God knows how many more on top of all the others? Does he realise that when constituents read about it they will ask whether the Minister will tell them when the water rates will come down, and whether old-age pensioners and others will get a rebate? Those are the questions that he has to answer. When will water rates come down? Answer that.

Mr. King: The answer to the first part of the hon. Gentleman's question is, "Yes Sir. It does conform with

our policy". The hon. Gentleman is determined to maintain a central body when we are anxious to give the responsibility to the regional authorities, who clearly serve the consumer.

Mr. Skinner: When?

Mr. King: The hon. Gentleman's questions about reducing the charges show that he is uninformed about these matters, whatever structure exists.

Mr. Christopher Murphy: Is my right hon. Friend aware that his emphasis on real consumer consultation in the future will be welcomed by all water retepayers as they have found that their views have not been represented until now?

Mr. King: I am grateful to my hon. Friend, because one gets the impression from the questioning that we are attacking a well-established and well-respected system. Any hon. Member who has studied the matter will recognise that there is public anxiety about the present structure and a desire to see it changed.

Mr. Les Huckfield: Will not the Minister accept that the reply he gave to his hon. Friend the Member for Chorley (Mr. Dover) about appointing more business men confirmed our worst fears about this being yet another extension of Tory party patronage? Will he not accept that his new authorities will still be too remote and even less democratic and that the customers still will not know their representatives? His proposals will do nothing to eradicate the faults that emerged from the two committee reports. How much does the Minister think he will save?

Mr. King: On the first point, about the appointment of people with industrial and commercial experience, as I made clear in my statement, we shall seek nominations from local authorities in the area, county and district councils, and from agricultural and amenity interests. We shall seek the best combination of people to contribute to the efficient operation of the water authorities. I am sure that the hon. Gentleman has looked at this matter and has his views upon the water authority in the area he represents. He will know that people are worried about who the members are. There is no system for consumer representation from outside the authority. We hope that what we propose will be more effective than the present position.

Mr. Huckfield: How much will it save?

Mr. Geoffrey Dickens: I am not completely convinced that the proposals will have the results that we hope for, but on first inspection they can only be an improvement. However, is my right hon. Friend prepared to tell the House now that the new structure and streamlining of water authorities will help to reduce the wicked, cruel, unfair and unjust standing water charges that are financially crippling old-age pensioners?

Mr. King: I am glad that we appear to be passing my hon. Friend's first inspection, and I hope that his further inspections will be equally satisfactory to him. The wider issue about the system of charging has been a matter of considerable discussion. I understand my hon. Friend's point and I know that with more effective consumer representation by consumer committees, this issue will be examined.

Mr. D. N. Campbell-Savours: Have not these arrangements been introduced to accommodate a later privatisation of the industry? Which of the 11 chairmen supports what the Minister said at the Dispatch Box today?

Mr. King: The hon. Gentleman should not put ideas into our mind. Water authorities need this change in structure, and if the hon. Gentleman examines the position in his constituency he will find the problems and needs that exist. It will be helpful to have consumer representation in the North-West water authority that is closer to the people he represents.

Mr. Denis Howell: Has not the Minister repeatedly failed to satisfy the House that any substantial economies will be made? His list of savings was trivial and irrelevant, especially the saving on people coming to London by train. Does he agree that he cannot say—nor will it happen—that these proposals will reduce water bills in any way for water consumers?
The Minister proposes to replace the voluntary system of membership by nine to 15 full-time executives, according to the statement, which will far outweigh the cost of a chairman's odd visit to London to the National Water Council. Is the Minister not trying to blind consumers with Conservative science, which will not work because their agitation was to bring bills down, and this will do nothing to reduce any bill anywhere?
Two even more important points that the Minister should consider are those of investment and national wage negotiations. Is it not clear from what the Minister said that the Government have not thought out this matter? They are to issue a discussion document about national wage negotiations, which is one of the most crucial parts of wage negotiations. Further, they said nothing about maintaining investment.
What the North-West wants to replace the falling sewers is not a new structure but money and investment, and there is nothing in these proposals that will produce or guarantee that. Are not these things inadequately thought out and a disservice to the industry and the House? Can the Minister arrange a debate as early as possible before he introduces the legislation?

Mr. King: The question of a debate is not a matter for me, but the right hon. Gentleman's request will have been heard by my right hon. Friend the Patronage Secretary.
The right hon. Gentleman's comment about the North-West was singularly ill-informed. It appears that he is not aware that last year the North-West water authority was not able to spend the full capital allocation which was available to help with sewer renovation. The right hon. Gentleman made an unfortunate reference.
As to economies, perhaps the right hon. Gentleman is not used to dealing with people who are modest and anxious not to make any claims before they can be demonstrated. Being a modest person, I simply said that there will be economies, and significant ones. I am not prepared to state now what their scale will be, because it will depend—[HON. MEMBERS: "Ah".] Hon. Members say, "Ah," because they want me to jump into an early announcement, but the scale of the economies will depend simply on the final decisions that are taken.
The right hon. Gentleman revealed once again what a centralist he is with his remarks on wage negotiation and other arrangements. The matter will depend on the judgments of the chairmen of the regional water authorities, on the best arrangements that they decide to make in agreement with the trade unions and negotiations about the wages and conditions for their employees. That is where those decisions should be taken.

Council House Rents (Freeze)

Mr. David Winnick: I beg to move,
That leave be given to bring in a Bill to freeze council house rents for 12 months.
The purpose of my Bill is to freeze council rents for 12 months from next April. In the past three years council rents have gone up by about 117 per cent. on average. The Secretary of State for the Environment, who is present today, announces each year the sum by which he expects local authorities to increase rents. The right hon. Gentleman has stated that he makes no apology for what can only be descrbed as exorbitant rent increases. In the same period that rents have gone up by 117 per cent., the increase in the retail price index has been less than half that figure.
This year, council rents have increased by nearly 20 per cent., and the Government's norm for incomes increases is 4 per cent. maximum. Only yesterday the Chancellor of the Exchequer said that he expects no increases in incomes for next year. These rent increases over the past three years have seriously undermined the living standards of a substantial number of tenants.
I am seeking permission to bring in my Bill because, with my Labour colleagues, I strongly believe that council tenants have been punished enough by this Government and it is time for at least a year without any rent increases. In case there is any opposition to my having leave to bring in such a Bill and it is argued that these rent increases are necessary, I point out that such increases have been introduced by the Secretary of State for two main purposes.
The first is to reduce substantially and then to phase out Government subsidies for local authority housing. Since the Government have been in office there has been a reduction of 41 per cent. in such subsidies. The second reason for these exorbitant rent increases applied by the Government is to exert pressure on council tenants to buy the houses in which they are living. The Government are saying, in effect, to council tenants "These increases will take place year after year and you will be better off buying your dwelling."
It cannot be argued, either, that such rent increases are needed for council house building. In 1981 the number of public sector housing starts was the lowest since 1924, except for wartime. It is now so rare to see council dwellings being built that one would want to take a photograph if one saw some. It is a unique event in Britain under this Government.
There is growing anger and resentment among tenants at the way in which they have been treated. They have been penalised and punished because they are council tenants. There is no justification for applying, year after year, the kind of rent increases that we have seen since 1979. The time has come to call a halt. There should be a freeze for 12 months. I am not arguing that once that freeze is over the rent increases that have been applied should start all over again.
It is the policy of the Labour Party that when the next Labour Government comes in there should be a rent freeze for 12 months. I am anticipating such a policy.

Mr. Teddy Taylor: rose—

Mr. Speaker: Does the hon. Gentleman wish to oppose the Bill?

Mr. Taylor: Yes, Mr. Speaker.
Although the hon. Member for Walsall, North (Mr. Winnick) put his case very eloquently, it would be irresponsible for such a Bill to be approved without a voice being raised against it, because, as the hon. Member knows, a freeze on rents would mean more on rates. The hon. Gentleman gave not a shred of justification for the proposed alteration in payments by two groups of people. He produced no evidence to show that those who live in council houses are suffering greater hardships than many of those who are finding it extremely difficult to pay their rates. We all accept that any payment causes hardship, but there is ample evidence that many people are finding it extremely difficult to pay ever-increasing rates, which in many cases have soared far higher than council rents.
If we approved the Bill, it would undoubtedly discourage the sale of council houses. It would do a great disservice to council tenants who are in a position to purchase. There is no doubt that a person living in a council house, deprived of the opportunity of mobility and of obtaining an asset, is in a much worse position than a person who can purchase. All the evidence shows that those who have taken advantage of the opportunity to buy their homes have the prospect of putting something aside in savings, of having an asset, of having more mobility, and of being freed from what I consider is wrong—that is, paying rents all their lives and having nothing to show at the end.
The traditional reason for increased rents, apart from spasmodic movements, is that costs increase. It was irresponsible of the hon. Gentleman to say what he did without making a plea for moderation in wage claims. A few minutes ago, we heard the hon. Member for Bolsover (Mr. Skinner) say that he wanted lower water charges, but he has never led any marches calling for wage restraint among those who work in the industry. We in this House must be responsible and say that someone must pay. We should concentrate, not on silly political slogans, but on finding real solutions to the problems of council tenants and others, and that involves finding ways of being more efficient and improving services and management.
The main reason why I oppose the Bill is that, instead of looking for silly political slogans as an answer, we should look for ways of reducing the costs of every tenant and ratepayer. Let me give an example. This morning it was announced in Southend that, after the first year's full audit of our newly privatised cleansing service, we had saved ratepayers £502,000 out of a cost of £2 million. If we did that for all the services, we could freeze rents, freeze rates, and give everyone a better service.
Question put and agreed to.
Bill ordered to be brought in by Mr. David Winnick, Mr. Frank Allaun, Mr. Bob Cryer, Mr. Allan Roberts, Mr. Derek Foster, Mr. D. N. Campbell-Savours, Mr. David Stoddart, Mr. Julius Silverman, Mr. David Watkins, Mr. Dennis Skinner, Mr. Alfred Dubs and Mr. Thomas Clarke.

COUNCIL HOUSE RENTS (FREEZE)

Mr. David Winnick accordingly presented a Bill to freeze council house rents for 12 months: And the same was read the First time; and ordered to be read a Second time upon Friday 9 July and to be printed. [Bill 161.]

Mr. Bob Cryer: On a point of order, Mr. Speaker. I was astounded to hear the hon. Member for Southend, East (Mr. Taylor) oppose the Bill. I understood that when a Member is called to oppose a Bill, it is usual for him to follow his opposition with a vote. What has happened suggests to me either that the hon. Member for Southend, East does not understand the procedure of the House or that he did not have the guts to put in Tellers for a measure that would greatly benefit council tenants.

Mr. Speaker: Order. I shall allow the hon. Member for Southend, East (Mr. Taylor) to pursue that point, which was not a point of order.

Mr. Teddy Taylor: I want to put it on record that I shouted "No" very loudly.

Orders of the Day — Local Government Finance (No. 2) Bill

Lords amendments considered.

Clause 1

LIMITATION OF RATING POWERS

Lords amendment: No. 1, in page 2, line 1, leave out subsections (2) and (3).

The Minister for Local Government and Environmental Services (Mr. Tom King): I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Paul Dean): With this it will be convenient to take Lords amendments Nos. 2 to 4, 7, 26, 28 and 30.

Mr. King: I realise that Members who have riot closely followed the proceedings on the Bill may have been somewhat surprised to see it on its return from another place with these amendments, which represent a substantial addition to the Bill. Part I is now expanded to include additional clauses. I say those who have not closely followed the proceedings, because no hon. Member who served on the Committee will be surprised. In fact, the amendments are a direct response to the requests that I received in Committee, partly from the Opposition. Therefore, I am pleased to move, That this House doth agree with the Lords in the said amendments in the knowledge that Opposition Members will welcome them.
Concern was expressed in Committee, by the hon. Member for Lewisham, West (Mr. Price) among others, about the uncertainty following the decision of their Lordships to disqualify the GLC precept on rates and the powers of authorities in that respect. In Committee, Opposition Members and others said that the matter needed to be cleared up. In Committee, on 25 March, I said:
The Government believe that action is necessary to make further statutory provision to clarify the position of rating and precepting authorities, and the ratepayers, especially where a precept or rate is found to be unlawful. The provisions will deal with the powers and duties of ratting authorities to reduce a rate, to make refunds to rate payers, to recover sums paid to precepting authorities, and to deal with the resultant costs to rating authorities.
We intend to table amendments to that effect on Report—in the House of Commons if possible, otherwise in another place. Members of the Committee will appreciate that I cannot be more specific about the technical details now as this is a complex area of rating law.
The right hon. Member for Manchester, Ardwick (Mr. Kaufman), anxious as always, to be helpful and to give us the benefit of his wide experience and advice said:
I give the Minister some advice for nothing. If he has any sense—that is a large assumption—"—
that must have been an unfortunate aside—
he will not table the amendments on Report but will give his advisers a little more time and will table them in another place."—[Official Report, Standing Committee D, 25 March 1982; c. 932–34.]
We are always anxious to listen to advice, from whatever quarter it comes. We took the right hon.


Gentleman's advice. I hope that he feels that we have discharged the undertaking that I gave in Committee. The amendments will help to fill a perhaps unanticipated gap in rating law. In that respect I think that they will prove helpful.
I shall give a brief outline of the new provisions, which I hope are reasonably self-explanatory. Originally they deal with the GLC problem. We have also taken the opportunity to sort out the problems that affect ratepayers in Bedfordshire through the precept that will become unlawful.
The various items dealt with the power of rating and precepting authorities to substitute a new precept or rate whether the previous one was valid or invalid. In other words, it is open to an authority to reduce its rate at a subsequent stage of the year. The Bill makes it clear that any substituted rate or precept must not be higher than the previous one. That must be so, because we already have a ban in the Bill on supplementary precepts and rates. There would be no point in allowing a substituted rate to be higher, because that would be a device to impose a supplementary rate by another route.
On the technical question of the correct forum in which to challenge a precept or rate, the High Court will deal with challenges to precepts or rates with regard to illegality and other matters referred to in the Bill. The High Court will not deal with issues of normal rateable challenge regarding hereditaments and individual circumstances.
I hope that the provisions are as I confirmed in Committee that they would be and that the House will feel that the undertaking that I gave on 25 March has been discharged.

Mr. Gordon Oakes: It is a travesty for the Minister to suggest that the amendments which emanate from another place are in any way in response to the confusion he caused to himself, the Government and the Committee, particularly with regard to Bedfordshire.
What astonishes me is that the amendments are Lords amendments. There is a great deal of controversy about the existence and future of the other place. Two arguments must be answered in any discussion about the future of the other place. First, if the other place did not exist, who would do the clearing up and provide the minor amendments to put right what the House has no time to do? That is a valid reason for its existence. The second valid reason for the existence of the other place is that it is the defender of the constitution. That is the purpose of the House of Lords. Part of the British constitution, unwritten though it may be, is that if something is not illegal, it is legal if at the time it is done it is not illegal. Any authority, any council and any individual has that right. What the amendments do, particularly with regard to one county council, is to render illegal that which a council legally did at the time that it did it, and did so on legal advice of the highest authority. That is a serious matter for the other place to consider. One would have expected that their Lordships of all people would have resisted pressure from any Government—Labour or Conservative—to try to change the constitution by the introduction of unashamedly retrospective legislation. They knew it was retrospective legislation because Lord Hill of Luton, in his opening words in the debate on the Bill, said:
If I may help to bring the discussion down to earth, at Second Reading I urged upon the Minister that he should make absolutely

clear whether the relevant clauses in this matter were retrospective or not. As your Lordships would expect, he has carried out that undertaking to the full. This is clearly, like it or not, retrospective."—[Official Report, House of Lords, 10 May 1982; Vol. 430, c.49.]
Those were the words of Lord Hill of Luton, who could hardly be accused of ever having been a member of the Opposition. That was his opinion on whether the series of clauses are retrospective. One need not go to the other place for such a quotation because one can quote the Minister himself. In Committee he agreed that this was retrospective legislation. Referring to Bedfordshire, he said:
I should like to confirm … the legal advice that I have received. The Bill will invalidate retrospectively supplementary rates or precepts made in respect of 1982–83. That will include those made before 1 April. Therefore, Bedfordshire county council's supplementary precept will fall on Royal Assent."— [Official Report, Standing Committee D, 25 March 1982; c. 932.]
I shall have more to say about the Minister's vacillations with regard to whether Bedfordshire's actions were legal or illegal, but there can be no doubt that the clauses are retrospective and therefore in breach of our unwritten constitution.
When I first came to the House—there was a Labour Government at the time—the Lords used their con-stitutional powers against the Bill affecting Burmah Oil. They did so precisely on the grounds that they were defenders of the constitution and that the Government were trying to act retrospectively. What were they doing during the Committee stage of the Bill that they did not likewise reject Government attempts to introduce retrospective legislation? It is retrospective legislation which affects one council—Bedfordshire county council—which offended the Government and, in particular, offended the Minister.
The position in Bedfordshire is somewhat complex. The House should be aware of some of the background. The county council has 83 members of whom 39 are Conservative, two Independent, who normally vote with the Conservatives, 34 Labour and eight Liberal. The chairman of the council is a Conservative. It is obvious that if the Labour and Liberal groups combine they have a majority on the council.
At the council's budget meeting on 25 February, two rate precept options were put before it. One was proposed by the Labour and Liberals groups, the other by the Conservative group. Throughout the debate it appeared that the former would be passed. However, in the final speech the Conservative leader declared that he would encourage legal action should the Labour/Liberal proposals be passed. One Labour member stated that he would not vote under such duress and left the chamber. As a result, the Conservative proposal was passed. Immediately after the meeting, notice was given to the chairman of the requisition of a special meeting by members of the Labour group. The precepts were issued to the four district councils. Two acted on the precept and set their rate; the other two, in the light of the fact that a special meeting of the county council had been requisitioned, deferred their budget meeting.
The special meeting was held on 9 March, which was the last day on which precepts could be issued to the district councils. The advice received from counsel by the authority was that it would not be possible to rescind the rate precept already agreed but that a supplementary precept could be agreed, and that it was unlikely to fall


foul of clause 2 of the Local Government Finance (No. 2) Bill, as drafted. The Bill was then in Committee and my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) and I were members of the Committee. On 9 March, a supplementary precept was passed restoring, to all intents and purposes, the original intention of the Labour and Liberal groups at the original budget meeting. The supplementary precepts were immediately issued to the district councils.
The matter was then brought to the attention of the Government and, according to a report in The Guardian, the Minister referred to it in a speech at a Conservative Party local government conference the following weekend. He said:
I am satisfied that our legislation"—
the legislation as then drafted—
will meet the situation.
One can forgive a Minister who is carried away by euphoria at a gathering of his faithful for making such statements.
However, the right hon. Gentleman later had time to pause and consider what he had said, because two sessions of the Committee were spent discussing the situation in Bedfordshire. There was a long debate on Tuesday 16 March when the right hon. Gentleman emphasised that nothing unlawful had been done by the county council in levying a supplementary rate. He admitted that such a situation had not been envisaged when the Bill was drafted.
4.30 pm
On Thursday 25 March the Minister announced to the Committee that as a result of the GLC-Bromley decision, amendments would be introduced to clarify the positions of rating and precepting authorities and of ratepayers, particularly in cases where a precept or rate was found to be unlawful. I took it to mean that the right hon. Gentleman was referring to precepts and rates that were found by a court to be unlawful and not to those judged by a Minister to be unlawful.
Referring to Bedfordshire, the right hon. Gentleman said:
I should like to confirm … the legal advice that I have received. The Bill will invalidate retrospectively supplementary rates or precepts made in respect of 1982–83. That will include those made before 1 April. Therefore, Bedfordshire county council's supplementary precept will fall on Royal Assent."—[Official Report, Standing Committee D, 25 March 1982; c. 932.]
Every Opposition Member argued that that was arrant nonsense and that the Bill as drafted would not have that result. The Minister should have said something today to the hon. Members who served on the Committee and he should have admitted that he was wrong and we were right. Another place had to introduce an amendment specific to Bedfordshire. One part of the amendment involves only Bedfordshire, because no other county council has acted in the same way.
I do not wish to raise the spectre of hybridity, but it is dangerous when general legislation has the malicious intent of hitting one county council which has fallen foul of the Minister's views and ideas.
The composition of the county council has changed and, as a result of the furore over its precepts, the council is sitting today to consider a revised budget—basically the Conservative budget. The Government repeated time and again that the Bill as drafted covered the Bedfordshire

situation, but it did not. The Government amendments in Committee in another place go far beyond the limited amendments that were promised to us.
We are particularly concerned about new schedule A. I agree that paragraphs 3 and 4 fulfil commitments made by the Minister in the House and in Committee, but paragraph 1 represents a major change in the original Bill and paragraph 1(a)(i) is specifically designed to invalidate the Bedfordshire supplementary precept. That represents a complete admission by the Government that the oft-repeated assertion that the original Bill would make the precept invalid was at least open to serious doubt.

Mr. David Madel: The right hon. Gentleman is castigating people for not thinking carefully about what the law was, but does he not agree that between 25 February and 9 March the members of the county council should have thought long and hard about the consequences of a supplementary precept? It was made crystal clear to them that they could not wipe out what they had done on 25 February and could only top up the rate. Should they not have thought carefully about that before colliding with the Bill?

Mr. Oakes: The members of the county council thought long and hard and not only discussed the matter with their chief executive and other officers, but sought an opinion from learned counsel on whether the Bill, which even now is not an Act, would render what they were doing unlawful. Their officers and learned counsel told them that the Bill would not have that effect. It is not true to suggest that the county council plunged headlong into attempting to thwart the Government. Councillors were in a desperate situation because of the complexity of the composition of the council and because of the Bill. They wanted to issue a supplementary precept to do what they, as democratically elected councillors, were elected to do. That was their offence.
The new schedule states that if a precepting authority passed a supplementary rate before 1 April 1982 the money so raised shall be repaid to the ratepayers or authorities concerned on demand. Whatever the Minister says, that is a significant change in the Bill. We are not discussing a tidying-up amendment.
No court is involved and we are not dealing with the sort of difficulties that arose in the GLC case. No court has intervened in the Bedfordshire case. The Government alone are changing the law retrospectively to suit their own ends. The schedule makes retrospectively unlawful an act by a single local authority which the Government admit was lawful when it was done and now tacitly admit would not necessarily have been made unlawful under the original draft of the Bill, which was all that was available when the poor council was discussing the matter. The Government also admit that they had never envisaged that such a situation could come about and that the original Bill was not designed to invalidate such action.
The vast series of amendments from another place are designed to get the Minister and the Government out of another hole which they dug for themselves.
It may seem that I have discussed the matter in a dry, constitutional, legalistic way. I want the House to realise the effects of the Government's actions on the people of Bedfordshire. I hope that the hon. Member for Bedfordshire, South (Mr. Madel) will put the point of view of Bedfordshire and particularly of the county council.
Cuts in services were proposed at a meeting on 17 June and submitted to the full county council, which is meeting at this moment, to consider how on earth it can fit its budget into the straitjacket that the Government have imposed on the council. It is right that the House should be told some of the results of the Bedforshire cuts, which arise almost directly from the Government's actions.
Staff reductions are proposed in all types of schools, with 240 teaching posts, 35 non-teaching posts and 10 administrative posts to go by not filling vacancies, termination of temporary contracts and voluntary early retirement. The council is trying to save £1,390,000 in that way. The price of school milk will have to rise and the price of standard meals will increase from 65p to 70p.
In higher and further education there will be no new discretionary awards, and about 700 young people in the county will not be able to claim grants. That will save another £350,000. No aid will be given to summer schools and there will be no letting of schools at weekends. There will be extra Christmas holidays for the children—the schools will be shut down completely during Christmas week, with holidays extended by one week, to be made up after Easter—to save fuel. There are also to be reductions in the maintenance of school grounds. I could go on and on about education alone.
Social services suffer even more. Carlton community home is to be closed and no alternative provided. There will be a reduction in the budget for community developments. The cost of meals on wheels is to increase from 45 pence to 55 pence, as are meals at centres and luncheon clubs. Tomlinson House residential nursery in Luton is to be closed to save £38,000.
Those are the effects of the Government's actions. This is not simply a matter of constitutional legalistic argument. The council is unwillingly doing severe damage to the people of Bedfordshire. It well knew at the time that it issued the supplementary rate that that money was needed to keep basic services going. That is the result of the introduction of this retrospective amendment to the law by the other place.

Mr. John Carlisle: The right hon. Gentleman has not finished his catalogue of the effects on the ratepayers of Bedfordshire. He has omitted to mention—perhaps I am pre-empting him—what would have been the effects on employment in the area if the enormous rate rise proposed by the Labour and Liberal Parties in Bedfordshire had come about. Would he care to give the House the number of people who would become unemployed, for example, in Vauxhall Motors as a result of such a rate rise? As he knows, the company is a major employer in the south of the county. What effect would such a rise have had on Electrolux Ltd. in my constituency? What effects would the rate rise proposed by the Liberal and Labour Parties have had on employment, particularly in the south of the county?

Mr. Oakes: I cannot give the House such figures. The hon. Gentleman has quite rightly paraded several companies from his constituency before the House. However, there is always a great deal of exaggeration by the Conservative Party of the effects of rate increases on industry. Few jobs, if any, would be affected by the supplementary rate increase. If the hon. Gentleman is worried about the effects of such increases on industry, let

him consider the effect of increased telephone, gas and electricity charges. They have a far more damaging effect upon employment than do rate increases.
I wish now to leave the subject of Bedfordshire, but I hope that the hon. Member for Bedfordshire, South will discuss what has happened to Bedfordshire county council.
Lords amendment No. 3 will allow a future incoming council to reduce the rates. It will not allow an incoming council to increase the rates after an election. It is a one-way street. If there is a change of control on the council after the May elections and a Conservative council is elected, that council will have the power to reduce a rate imposed by its Labour or Conservative predecessor, but it cannot increase it. Where the democratic choice has been made by the electorate for an increase in services, and a Labour administration replaces a Conservative administration pledged to carry out those improvements, it is forbidden to do so by the general tenor of the Bill.
The continual ratchet effect is that rates can go down but, no matter what democratic decision is made in the elections, the newly elected council is powerless to carry out those improvements. That is another effect of this amendment. It cannot be said that this is merely a technical tidying up of something that has been done in Committee or in the House. A major change in the law has been effected in the other place.
4.45 pm
Lords amendment No. 4 is very puzzling. It refers continually—perhaps the Minister will explain why later—to "judicial review". I take it that that means the High Court, because that is the obvious court to deal with this matter. If the Government mean the High Court, I suggest that they say that and not "judicial review". Those words are not normally put in a statute. I wonder what the Government have up their sleeve in the use of the words "judicial review" rather than the more traditional words "High Court". However, that is a minor matter with regard to this amendment.
Subsection (2) of new clause B gives the grounds upon which the validity of a rate can be questioned by means of judicial review. They are:

"(a) that any part of it was made for financing expenditure which the rating authority could not lawfully incur;
(b) that it was made by reference to a precept which was wholly or partly invalid; or
(c) any other ground not based on facts relating to a particular hereditament or to the inclusion or exclusion of any particular person in or from the rate."

Those are wide powers indeed.
The effect seems to be that if there is a challenge to the High Court on the illegality of a part of the rate, no matter how minor or technical, if the High Court finds that there is a technical error or illegality, the whole rate has to be called in and quashed and a new precept issued. That would incur, for no reason at all, enormous expense by the authorities concerned. I am not talking about a major decision as to illegality, such as the London Transport issue, when a council was forbidden by the High Court to do what it was elected to do. However, there can often be a technical infringement which the court considered was illegal.
As I read the clause, if that arises the whole rate has to be quashed. Ratepayers cannot be credited in the following year for something taken out of the rate. Nothing like that can be done. The rate that is quashed by the court must be


withdrawn and another precept issued to the district council. Who will pay for all that? Who, incidentally, will pay for that in Bedfordshire now? It is the district councils that bear the burden of the collection of the rates, not the county councils. They have not only the burden of dealing with the ratepayer who believes that the money is going to the district not the county council but the physical burden of paying for it all. They are not reimbursed for that now by the county council because of Government policy.
Lords amendment No. 4 is a sledgehammer to crack a nut. I hope that the Minister will explain, first, why he uses the words "judicial review" rather than "High Court", and, secondly, why he is taking such wide powers to deal with what is already well dealt with. The current law can deal with an infringement or illegality without the whole of the rate being quashed under this sledgehammer of an amendment. Their Lordships have badly misdirected themselves. They should be the defenders of the constitution in Britain. They should be the authority that says to any Government of any political persuasion that it cannot retrospectively make illegal that which was legal at the time it was done. That is clearly the position with regard to Bedfordshire. By using the other place of all places, the Government have prostituted themselves by conniving at the introduction of retrospective legislation. The one raison d'etre of the other place is to prevent that sort of process.
I am sure that all my hon. Friends and members of the Liberal and Social Democratic Parties will vote against these Lords amendments, which are alien to the Bill that left the House.

Mr. Madel: I welcome the chance to say a few more words about Bedfordshire. The right hon. Member for Widnes (Mr. Oakes) said that a great chunk of the amendment relates to what has happened in Bedfordshire. I was not among those who considered the Bill in Committee, and apart from a short speech on Report this is my only further opportunity to contribute to debates on the Bill.
As the right hon. Gentleman rightly said, Bedfordshire county council is today considering budget reductions and alterations in spending. It is speculative to talk about what will be decided unless we rig up a hot line from here to the county hall. Various options are before the county council. I gather that some amendments were passed this morning on nursery units and their funding next year. We are in some difficulty because our debates happen to have coincided.
The right hon. Member for Widnes rightly said that there is no overall political control in Bedfordshire. The fate of the Conservative Party and that of the Labour Party on Bedfordshire county council depends on which way the Liberals vote and on whether all the Liberals are present to vote. When an attempt was made in July 1981 to put through a supplementary rate, not all the Liberals were present.

Mr. David Alton: Will the hon. Gentleman tell the House whether all the Conservative and Labour members of the county council were present?

Mr. Madel: I know that all the Conservative members were present. I am pretty sure that all the Labour members were present too. I know that a Liberal member was absent. However, the Liberals have always wanted power. They have wanted to march towards the sound of gunfire

and they have wanted the red meat of politics. All that is in their hands on Bedfordshire county council. If they decide to vote with the Conservatives or the Labour members, issues will be decided in that way.
Bedfordshire is not a low-rated county. It is not noted for low spending. Indeed, there has been great controversy about rating and spending in the county. The last occasion on which there was a whopping increase in the rates bill was in 1974 at the time of the reorganisation of local government. There was a tremendous campaign against the heavy rates that were then being levied. The Liberal Party, true to form, was up to its neck in the campaign against the high rates that were being imposed on both commercial and domestic ratepayers
All the county councillors knew that 25 February was rate-fixing day. We could argue all day and all night about why the parties were not at their full strength when the vote was taken, but I do not think that it would he an advantageous discussion. However, it was clear that my right hon. Friend the Secretary of State had already announced that supplementary rates would be outlawed. Secondly, it was clear that the rate that had been fixed would not be washed out and replaced with another one and that there would have to be a supplementary rate if it were decided to increase expenditure.
County councillors were reminded of those facts between 25 February and 9 March. The county council was levying a supplementary rate not for that year but for 1982–83. Two district authorities instantly levied the precept following the meeting of 25 February. That was their legal duty. They would not have been carrying out their duty if they had delayed or found excuses for not levying it. They were required to levy the rate there and then and that is what they did.
Those who wanted a higher rate could get it only by introducing a supplementary rate precept. I agree that we do not want to spend all day and all night talking Bedfordshire's expenditure, but on education its per capita spending is 16 per cent. above the national average in England and Wales and its spending on social services is 10 per cent. above the average. If the right hon. Member for Widnes were on the Government Bench as a member of a Labour Government, he would not criticise Bedfordshire for low spending. There has been discussion of an education block grant. If we adopted that system, the right hon. Gentleman and his colleagues would not criticise the county council for being a low spender on education. Low spending is not a problem in Bedfordshire. The consequences of high spending that fall on commercial and domestic ratepayers lies at the heart of the matter.
For historical reasons Bedfordshire is a highly rated county. One reason is that over the years it has been required to accept a large inflow of population from London. The county's population has rocketed. I am glad that my right hon. Friend the Secretary of State approved the structure plan for low growth for the next 10 to 15 years.
The rapid growth in the population and statutory requirements in respect of schools and social services has led to the county being highly rated. The electors did not like the supplementary rate demand which they received following the decision of 9 March.
In South Bedfordshire one-third of the district council was standing for election. The Conservatives considered it to be their duty to make the supplementary rate the major


issue. It was for the electorate to decide whether they approved or disapproved of it, and they showed massive disapproval. In virtually all seats Conservative candidates received over 50 per cent. of the votes cast. There are those who say that that has changed and that opinion has shifted. However, we have fresh evidence. In a district council by-election last week the Conservatives again gained a seat from the Liberals and again took over 50 per cent. of the vote. The blunt and inescapable truth is that in Bedfordshire high rates deter businesses and commercial institutions from coming into the county. High rates are mightily unpopular with the electorate.
I am glad to see the right hon. Member for Manchester, Ardwick (Mr. Kaufman) is in his place. He will recall that when he was Minister of State, Department of Industry, in the previous Labour Government, he received me courteously when I asked to speak to him about the crisis facing Chrysler Trucks in Dunstable. As my hon. Friend the Member for Luton, West (Mr. Carlisle) has said, many firms in the area have protested strongly about high rates, and Chrysler Trucks was one of them. Whatever one says about spending and about the system—there is a need to change it—Bedfordshire's spending on education, social services and other items has shot ahead of that of other county councils. That is why it has been penalised under the legislation that my right hon. Friend has introduced.

Mr. Kenneth Marks: Has the hon. Gentleman made any effort to ascertain from Vauxhall and other industrial ratepayers the proportion of their turnover that is represented by rates? In my area it amounts to less than 1 per cent.

Mr. Madel: Vauxhall and other companies have made it their business to tell Bedfordshire Members and the county council that large rate increases are having a detrimental effect on them. They do not like them and they strongly oppose them. They have every right to do so. It is not true to suggest that for years Bedfordshire had a low level of rating and that it has suddenly shot up. The county has suffered high rates for years. When the supplementary rate was announced it made firms even more anxious about the employment base and their general future.
I welcome what the Government have done in the Bill. We could go on arguing in Bedfordshire ad infinitum about the level of spending and rating. However, the fact cannot be escaped that once the decision was taken on 25 February to levy the general rate county councillors knew that if they wished to top it up they would collide with the Bill and the Government. They knew also that if they proposed the supplementary rate their action would have a deleterious affect on business and ratepayers.
The proof of the pudding lies in what electors in south Bedfordshire have said since 9 March, in their voting in the district council elections. They have given a decisive thumbs down to high rates. Bedfordshire wants a reasonable level of services and I have fought for that. It wants a reasonable level of Government grant to sustain those services and I have fought for that too. It wants a reasonable level of rates to be levied on the domestic and commercial ratepayer. I am grateful to my right hon. Friend for protecting us.

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Mr. Alton: The right hon. Member for Widnes (Mr. Oakes) put up a formidable defence of local government. It was warranted, because of the insidious nature of the Lords amendments. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) told us in Committee that we would hear much more about Bedfordshire, and he was not wrong. We shall continue to hear a great deal more about Bedfordshire, because, as the right hon. Member for Widnes said, the Bill may prove to be hybrid. I hope that Bedfordshire county council will take advice and be prepared to challenge the provisions in the courts if necessary.
I listened to the hon. Member for Bedfordshire, South (Mr. Madel) with care and I took exception to one or two of his remarks. The amendments have nothing to do with a by-election last week which the Liberals may have lost. They have nothing to do with one Liberal being absent from a meeting of the council when it was deciding its rates precept. The amendments have to do with the way in which we run local government. They go to the heart of local government. In line with much other legislation in the last three years, the Bill represents yet another attempt to take power and control away from the people elected to take decisions locally.
That was the issue which concerned us in Committee and which worries us today. Surely the electors of Bedfordshire, who elected a majority of Liberal and Labour members to the council, had a right to elect on the basis of a mandate. The councillors were elected to do a job and to spend money in certain ways. When a by-election occurs at Hillhead, Coatbridge and Airdrie or Crosby, hon. Members do not say that the result proves that everything that the Government have done is wrong and that it must be undone and made illegal. We are today being asked to agree an incredible principle.
Ministers would have many sleepless nights if an incoming Government had the right to make illegal everything done by the previous Government. That would be a curious principle and hon. Members from all parts of the House would fight against it. Government Members should not be surprised if councillors take exception when that is done to them. Councils throughout the country are anxious about the impact that the legislation could have on their rights to take decisions.
We have been told about the impact of the legislation on local employment in a highly rated area such as Bedfordshire. I understand hon. Members' anxieties. All hon. Members are interested in obtaining value for money for ratepayers. That was the spirit of the Bill originally. Everybody, regardless of political allegiance, applauded the principle of obtaining value for money for ratepayers.
Councillors in places such as Bedfordshire were elected because they said that they wanted to retain services, not reduce them. They talked about expanding some services. No one should be surprised that when elected they did what they said they would do. People are cynical about politicians because, they say, they rarely keep their promises. Here is an example of councillors keeping their promises, yet they are being told that they acted illegally.
The hon. Member for Bedfordshire, South talked about employment. It comes hard to those of us who have had to suffer the consequences of massive unemployment caused by Government policies to listen to Government Members who shed crocodile tears about the impact of


increased rates on employment. About 1½ million people are in the dole queue, in addition to those who were already there in 1979. That is mainly a direct result of Government policies.
In Liverpool, 10,000 trees have been planted by the Government in the last year. They have planted 10,000 trees for the 10,000 people who have become unemployed in the last 12 months. That is the type of crude monetarism to which so many Government Members subscribe. It is hard to listen to Tory Members talking about unemployment in a bland and smug way as if they have discovered the philosopher's stone and have a monopoly of concern for the unemployed.
I was amazed at the bland way in which the Minister introduced the debate. I was amazed at the way in which he distorted what took place in Committee. The right hon. Member for Widnes spelt out how, at a meeting with Conservative councillors, the Minister made a mistake and over-committed himself on how he would deal with the nasty Liberals and Socialists in Bedfordshire. He then had to try to undo the damage done in Committee. That is how the confusion arose.
The Minister told the Committee that there would be no difference, that the provision was unambiguous and that everything would be all right. Then he decided that the provision was ambiguous, and he has had to introduce special legislation to cover his tracks. Because of one mistake by one man, we are putting cover-up legislation on the statute book. That is a new principle in Government. It is a farce.
Since the Government were elected, the Secretary of State for the Environment has often talked about giving further and greater powers to local government. He has talked about the power to have greater control over one's destiny. His words have proved to be a masquerade. The urban development corporations take away power from local councils. The Local Government, Planning and Land Act takes powers away from local councils. The Housing Act takes away the basic power to decide how to dispose of local housing stock. This Bill is another example of the Government's taking power away from local authorities.
The Government are rewriting the law, backdating punitive measures and throwing councils into turmoil. Let us consider what will be the impact on the many decent people serving on local councils throughout the country. Will they have to look over their shoulders all the time and wonder whether the Secretary of State will make illegal something that they did four or five years ago? Perhaps they decided to spend more money on social services, housing, education or welfare. Will the Secretary of State make that illegal, prosecute them and perhaps surcharge them? That is the principle enshrined in the Lords amendments. Many local councillors do a great service to the community. It is monstrous that an additional burden and worry should be placed on their shoulders.
I urge hon. Members to do what the right hon. Member for Widnes suggested. Wherever they sit in the House, they should go into the Lobby and vote against the amendments if they are concerned about the rights and freedoms of local authorities. The issue involves not only Bedfordshire county council but every council in the country. If hon. Members are interested in local democracy and want local authorities to have more control, not less, they should vote against the amendments.

Mr. Harry Cowans: I apologise for not being here to listen to the Minister, but I was engaged outside the House on local government matters. I was amazed to arrive and find my right hon. Friend the Member for Widnes (Mr. Oakes) already on his feet. I expected the Minister to take longer to explain the amendment.
I arrived in time to listen to my right hon. Friend. Because I did not hear the Minister's speech, I was somewhat amazed by some of the points that my right hon. Friend made. It then dawned on me that he was doing so because of the brevity of the Minister's speech on amendments which are crucial to local government. I understand that the Minister took only seven minutes to explain devastating amendments that mean everything to local government. I am sad to have missed those seven minutes, but the House is entitled to more than seven minutes.

Mr. John Cartwright: Would the hon. Gentleman care to comment on the fact that the Minister is returning the compliment by missing his speech?

Mr. Cowans: I am grateful to the hon. Gentleman. I have missed less than the Minister is about to miss. Had he stayed, he might have learnt a little. We may even have convinced him to move from his political bias and to vote against the amendment.
The hon. Member for Bedfordshire, South (Mr. Madel) missed the main point. It matters not whether a Liberal, a Socialist or a Tory missed a meeting. The crucial fact is that the legislation applies equally to either a Labour or a Conservative Secretary of State. The important point is not who missed a meeting, but that people who take a decision that at the time is lawful may suddenly discover that it is unlawful, irrespective of the party to which they belong.
Councillors in South Bedfordshire did what it is normal for councillors to do. Many Labour Members—probably more than Conservative Members—have served on local authorities. The councillors in South Bedfordshire asked their officers for the best legal opinion on what they were doing. The chief executive sent a letter to all Bedfordshire county councillors on 4 March. It contained the following advice:
It is doubtful whether the present terms"—
that is a classic phrase as conditions have changed even since the letter was written—
of clause 2 (which deals with precepts) would, if passed into law, achieve the result intended by the Government. It is considered more likely that a court would hold that it was not retrospective in its effect, so as to overturn things already done which were lawful at the time.
That is lawyers' language, but one does not have to be a BSc to work it out. A legally trained man said that, no matter what the Government did, they would not overturn what was being done legally at the time. The hon. Member for Bedfordshire, South missed that, and it is a crucial omission.
The amendments affect not only Bedfordshire. It would be sad enough if they did. They affect the whole of local government. Like many Opposition Members, I spent much time in Committee. I thought from the outset that the Bill was bad, but even I did not think that it could be made any worse when it went to the other place.


Unfortunately, I was wrong. They have climbed Everest. They have made the Bill, which was bad when it started, even worse. I did not believe that they had it in them.
The Government gave several assurances that we accepted in good faith. Since then, lo and behold, and with the best of intentions, the Government, via the Minister and the other place, have dug the pit even deeper. They have successfully made a nonsense of a Bill into an even bigger nonsense.
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As the hon. Member for Liverpool. Edge Hill (Mr. Alton) said, councillors give much time and effort to their duties. They can only play by the rules in effect at the time. Even now, the rules have not changed. There may be many councillors in committees trying to take a decision which is lawful now, but which may suddenly become unlawful if the Bill, as amended, is enacted.
What kind of nonsense is that? It is the nonsense of making legislation retrospective and telling people, who have honestly deliberated and taken a decision, that, although they were acting legally when they took the decision, it is now unlawful. That may be nine months, 18 months or two years later. It is the result of a politically biased Government.

Mr. Alton: How far can the retrospection go back?

Mr. Cowans: The hon. Gentleman makes a good point. Perhaps the Government will tell us. Retrospection may apply as far back as 1066. Nobody knows. The mind boggles. That type of nonsense does not come well from legislators.
It is worth examining what has happened. In Committee we were told that supplementary rates were terrible. That was in spite of the fact that the Government, in support of their contention, could count on one hand with three fingers missing those who applied the supplementary rate. We were told that supplementary rates were expensive, against ratepayers' interests, and terrible in every way, even though they had been used only rarely. To overcome that problem, the Government use a massive sledgehammer to crack a tiny nut.
What do we have in its place? We are told that no matter who are in power—the Conservatives, the Labour Party, the Liberals, the Social Democrats, or the last two together—they can take only one course of action, despite the election promises that they might have made before being democratically elected—to reduce the rate.
I am a super-optimist. A Conservative administration may want to increase the rates, but they will not be allowed to do so. We are embodying in law a provision that will not allow any administration, irrespective of election promises, to increase rates. They will be allowed to substitute a rate, but only if that rate is lower. If that is not political bias, I do not know what it is.
The Government were elected on a manifesto saying that they would return to local government the democracy that a Socialist Government had taken away. That now turns out to be a false premise, because since then they have passed all manner of legislation to make it impossible to fulfil that pledge.
The Committee report is very thick. The Government cannot retract what they have said, because it is in print. They have said that they are concerned about costs in local

government. As the hon. Member for Edge Hill and my hon. Friend the Member for Bootle (Mr. Roberts) have said, we are all interested in getting value for money, but the amendment will not achieve that. If local authorities have power only to reduce the rates, it follows as night follows day that if they do so the ratepayer is entitled to reimbursement. The amendment covers that, but in an utterly ridiculous way. Unless the Government tell us otherwise, it is clear that the reduction will be passed on to the ratepayers. It is important briefly to examine this aspect.
According to Lords amendment No. 3, if an authority exercises the only right that it has—that of reducing the rates—those who have paid the higher rates are entitled to a rebate on demand. Let us consider that from the point of view not of the Government, who have no experience in these matters, but of those who have served in local government and have more experience. The amendment allows the authority to reduce the rates and to pay a rebate on demand. What does that mean? Does it mean that if I have paid my rates and a Conservative council is then elected and exercises its only right under the Bill and reduced the rates, I am entitled to a rebate on demand? Do I have to apply as soon as the rate is reduced or can I be reimbursed three, six, nine or 18 months later? When does my right to reimbursement run out? The Bill does not make this clear. Perhaps the Minister will tell us.
Let us now consider the categories of people entitled to reimbursement. Here the mind boggles.

Mr. King: It does indeed.

Mr. Cowans: The Minister has joined us. He is boggled, too, and so he should be. In fact, I think that he has been boggled since the beginning of the Committee stage. Nevertheless, he is now with us and that is something to be proud of.
Let us assume, for the sake of argument, that the ratepayer has six months in which to claim reimbursement. Clearly, there are inherent problems. Due to the Government's policies, many people now pay their rates monthly. They will be entitled to the difference between the amount that they have paid and the reduced rate declared by the incoming authority. Working out the sums involved and repaying them will involve enormous problems. Others who have paid only part of the rate will also be entitled to reimbursement. That, too, will create problems. People who have moved out of the area will be entitled to reimbursement on the rates that they paid when they lived in the area. Here the mind really boggles. They may have moved to Timbuctoo, Western Austrialia, South Africa or anywhere in the United Kingdom, but they will still be entitled to reimbursement.
Many people pay their rates with their weekly rent. They, too, will be entitled to reimbursement. Let us assume that an area containing an estate of 30,000 council tenants passes from Labour to Conservative control six months after the beginning of the financial year. If the incoming council exercises its only option and reduces the rates, all those tenants must be reimbursed. As I understand it, the tenants can demand reimbursement, but, provided that there is no claim, the council may deal with it as a credit. Perhaps the Minister will clear that up. Can the tenants claim that money, or has the authority the right to credit them with it? That is crucial, because the administrative cost of giving rebates to 30,000 tenants will be enormous.
If an authority reduces the rates according to the Government's amendment, will the Government pay the administrative costs of reimbursement? Of course not. They were challenged on this in another place. We have vacant provisions which say nothing about who is to pay for them. Perhaps the Minister will deal with this matter.

Mr. King: Clearly it would not be right for the Government to pay for the consequences of a decision taken by a council. If a council decides to substitute a lower rate and to repay rates previously extracted from ratepayers which it regards as unjustified, clearly the council must bear the cost of implementing that decision because the decision will have been taken not by the Government but by the council.

Mr. Cowans: It is usual to reply that one is grateful for the Minister's intervention, but I am afraid that I cannot carry on that tradition. That was the most ungrateful intervention that I have ever heard. It did not explain anything. I asked the Minister a precise question. If a local authority's only option is to reduce the rates, will the Minister write it into the Bill that, if it exercises that option, the cost of so doing will be reimbursed by the Government?

Mr. King: indicated dissent.

Mr. Cowans: If the Minister does not agree to do that, he will effectively take away the one option open to local authorities, because, fortunately, people in local government have a great deal more sense than the Minister. No council in its senses will reduce the rates when the administrative cost of doing so is greater than the supplementary rate that the legislation is designed to stop. If there is a bigger nonsense than that, I have yet to hear it. I shall probably hear it in the winding-up speech from the Government, because so far nobody has attempted to answer any of our questions.
It is no wonder that people in local government are worried. They have a great deal to be worried about, because if nonsense legislation of this kind is allowed to pass they will not know from one day to the next where they stand or what to do. The Bill is nonsense and the amendment makes it worse. I hope that all sensible right hon. and hon. Members will do the right thing today and vote against the amendment.

Mr. John Carlisle: I shall not detain the House for many minutes, but as a Member representing a Bedfordshire constituency I support my hon. Friend the Member for Bedfordshire, South (Mr. Madel) and the action of my right hon. Friend the Minister and the Government on this issue.
Although some of my hon. Friends may have sympathy for the argument against retrospective legislation and although the circumstances leading to these amendments being introduced in another place may not have been entirely to the liking of all my hon. Friends, the fact remains that between the dates of 25 February and 9 March all councils in Bedfordshire, of whatever political colour but particularly Labour and Liberal councils, were fully aware of the Government's intention to bring forward legislation to make a supplementary rate illegal. Whatever discussions took place or advice was given at that time, there was never any doubt in the minds of those councils,

or in mine, that the action and decisions that they took were totally irresponsible and caused immense trouble to Bedfordshire's ratepayers, as well as to ratepayers outside.
Whether this legislation is to everyone's liking, there is absolutely no doubt that those Liberal and Labour councils in Bedfordshire knew exactly what they were doing and that their actions would run foul of the law when it was enacted.
I see nothing wrong, nor do many of my hon. Friends, in trying to establish a once-for-all system when revenue is raised by local government. The Bill may be accused of being a political weapon and I can understand that argument. However, when ratepayers go the polls—they have had ample opportunity recently—they expect the councillors they elect to make decisions on their behalf. They expect a system of raising total finance for the year to be established.
As my hon. Friend the Member for Bedfordshire, South said, Bedfordshire is a high spending council and the ratepayers should have no complaint about the economies that must now be made. For the right hon. Member for Widnes (Mr. Oakes) to draw a picture of the devastation of services, particularly in education, virtually to imply that the social services would deteriorate overnight and that the ratepayers would suffer under the new but necessary economies is—I use the words of the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans)—complete nonsense. The right hon. Gentleman knows that the economies are only a tiny proportion of the total budget. The county spends £145 million on education, so the asking figure of £5·2 million is small. It is certainly necessary.

Mr. Oakes: Does the hon. Gentleman realise that the instances I quoted—there were far more than I gave—are actual examples of what is happening? They are recommendations by the finance committee that are to be approved by the council today. I would still be speaking if I read out the whole list. The hon. Gentleman suggests that I was scaremongering. I was reading out a list of what is actually happening in Bedfordshire and being proposed this afternoon.

Mr. Carlisle: I have resided in Bedfordshire all my life. Hon. Members who represent constituencies in Bedfordshire are in a far better position, as are the ratepayers, to reply to the catalogue of disaster read out by the right hon. Gentleman, who I accept did not go right through the list. The right hon. Gentleman represents a constituency many miles from Bedfordshire.
As my hon. Friend said, the ratepayers emphatically gave their own decision in the recent local elections in the south of the county. Liberal control of several councils was removed, with a big swing to the Conservatives. Those elections were unashamedly fought on the basis of the supplementary rate that the Labour and Liberal Parties had sought to implement. It is utter nonsense for a picture to be painted, particularly by the trade unions and some Labour and Liberal councillors, of services in Bedfordshire being devastated by those necessary economies. Redundancies in the teaching staff will not mean that the children of Bedfordshire will receive an inadequate education.
Clearly, painful decisions have had to be made. Those decisions have to he made by hon. Members in their own household budgets. Governments have to make them. If


a county is spending too much money, more than the ratepayers would desire, it is right that it should be reigned in.
I return to what I said in an intervention about employment. As my hon. Friend the Member for Bedfordshire, South said, as soon as the size of the original application by Liberal and Labour councillors for a rate increase of nearly 40 per cent. was announced, we were inundated with protests from local businesses. The hon. Member for Liverpool, Edge Hill (Mr. Alton) is right: we are as concerned about unemployment as any other hon. Member in the House. Companies the size of Vauxhall Motors have been losing money for many years. Whatever the percentage rate increase, we are placing on them a burden that they cannot bear.
When business in the south of the county is beginning to pick up and when the fortunes of great companies such as Vauxhall Motors, Electrolux, SKF Bearings, Kent and Whitbread are just beginning to move in the right direction, it is unjustified for them to receive the hammer blow of these rate increases. Those business men approached us in a responsible way. We are determined to give the ratepayers of Bedfordshire value for money. Proposals were made by the opposition parties for the creation of wholly unnecessary posts in education. The pupil-teacher ratio in Bedfordshire compares well with that of the rest of the country. As my hon. Friend said, in terms of the national average, we are 10 per cent. better than other counties. It is nonsense for the Opposition to suggest that these necessary cuts will have a devastating effect on our children.
I fully support the Government. It was totally irresponsible of those councillors, having been told in no uncertain terms what was in the Government's mind, to continue as they did. The Government are absolutely correct to introduce this legislation. I know that all Conservative Members will support it.

Mr. Cartwright: I shall not follow right hon. and hon. Members through all the highways and byways of Bedfordshire because I do know all the circumstances. I do not know who was present and who was missing at any specific meeting. I do not know what impact the cuts will have on services.
However, there are two general points that I wish to make about the Bedfordshire case. The first relates to the retrospective aspect of the legislation. I was taught that restrospective legislation was to be used only in the most exceptional circumstances. However, we now find that restrospection is a dominant feature of the Government's legislation, particularly when it affects local authorities.
For the hon. Member for Luton, West (Mr. Carlisle) to suggest that Liberal and Labour councillors ought to have been dissuaded from taking perfectly legal action because a Minister had indicated that he was bringing legislation before the House is to regard the House of Commons, and Parliament as a whole, as a mere rubber stamp. It means that we are governed by ministerial edict and not by the consideration that Parliament gives to Bills.
After all, it is within our memory that the Secretary of State proposed to make supplementary rates illegal unless approved by referendum. That legislation was nobbled before it got to the starting gate, and any councillors who

regarded that as an edict by which they had to abide would subsequently have found that it did not apply. Ministers do not decide these matters; Parliament does.
The Bedfordshire case shows the difficulty of tailoring legislation to suit an individual local circumstance or event. If the Government seek to do so, they produce bad legislation. That is certainly the case with the amendments now before us, which do not improve the simplicity of the Bill. It was complicated enough when we first saw it. We know that it was produced in a hurry as a result of the strange circumstances affecting its predecessor. We know that the Government amended the Bill in Committee. There is nothing particularly unusual about that, but we also had the extraordinary spectacle of Ministers amending their own amendments. Now we have still more amendments to the most controversial parts of the legislation which have been produced at the last minute in another place.
That gives the general impression of legislation on the hoof. It seems like legislation drafted on the run, with amendments drafted against the pressure of a timetable to get the Bill through. The result is what one would expect—an abortion of a Bill that will add to the complicated mysteries of local government finance and contribute to the grey hairs of municipal treasurers.
Lords amendment No. 3 relates to new clause A which is entitled "Substituted rates" but should be entitled "Reduced rates". As other hon. Members have pointed out, the only substitution that can be made is one lower than the original rate. The only circumstance where that could occur is in respect of a new council that had promised to reduce the rates immediately. It ought to have the freedom to carry out that promise. It is reasonable that a council that has persuaded its electorate to vote for lower levels of spending and standards of service to produce a lower rate should have the ability straight away to carry that promise into effect. It should not have to wait a year.
However, as other hon. Members have pointed out, there is the reverse case of councillors or candidates who have told their electorates, "Our services are not as good as they ought to be. We have a problem in our community that we want to tackle, but we must say honestly and fairly that the only way that can be done is by increasing the rates. If you elect me, one of the first things I shall do is to tackle that problem by increasing the rates."

Mr. Ted Graham: The GLC did that.

Mr. Cartwright: The GLC made a promise along those lines, but its arithmetic was slightly faulty because its promises in terms of costs were less than what the ratepayers had to bear.
Clauses 1 and 2 will prevent such councils from levying a supplementary rate to carry out such a promise. They will have to wait a complete year until they can levy the higher rates that are necessary. Those hon. Members who have had experience of local government may have inherited spending commitments for which the resources were not available. The practice of raiding the balances in election year is an honoured tradition in local government, and some of us have suffered from it. Even if one merely wished to run services at their present level, it is galling to find the larder bare and that not enough money is available to do so.
The Government view seems to be: "Hard luck, there is no way in which we will allow you to do anything except


reduce rates in your first year of office. If you have to increase them, we shall not allow you to do so." That is an extraordinarily one-sided approach. Although the Government may talk about increased freedom for local authorities, it seems to be a one-sided freedom. It is freedom if one agrees with the Government's polices. One is then free to do anything one likes so long as it helps the Government carry through their policy. But if someone disagrees with the Government, the Government will do everything possible, including the introduction of retrospective legislation, to prevent that person from disagreeing effectively. That seems to be the sort of democracy that the Government are preaching.
Apart from revealing the Government's attitude towards local democracy in particular, this attitude also reveals their attitude towards public spending. They clearly want reductions in public spending and are not prepared to countenance situations in which public spending must be improved to meet particular demands or to improve the level of services. That is a doctrinate approach. I shall therefore advise all my hon. Friends to vote against the amendments.

Mr. Allan Roberts: As a Labour Member of Parliament representing a Merseyside constituency, I am pleased to have the support of the hon. Member for Liverpool, Edge Hill (Mr. Alton) for the principle of local authorities having the power to raise supplementary rates. However, although the hon. Gentleman is very much in favour of that in Bedfordshire, he campaigned against the Merseyside county council supplementary rate. He is in favour of the principle of local authorities being able to raise supplementary rates, but he is against them when they affect his electoral prospects.

Mr. Alton: That is a total distortion of my view, and the hon. Gentleman should know better. While I am completely in favour of local councils making up their own minds about levying supplementary rates, I also believe that where a local council wastes or squanders ratepayers' money it is open to any politician of any party so to inform the electorate. Let the electors do something about it, not the Government.

Mr. Roberts: That is exactly the position of the hon. Gentleman that I was explaining. He is in favour of the supplementary rate in Bedfordshire, but against it on Merseyside. I conceded that he was in favour of Merseyside county council being able to take the decision in the light of the electorate's view, without Government interference.

Mr. Alton: I am not actually in favour of the Bedfordshire supplementary rate. I am in favour of that council's right to decide whether it wants a supplementary rate. That is a very different matter.

Mr. Roberts: That clarifies the matter very well. Exactly the same kind of double view was expressed by the hon. Member for Woolwich, East (Mr. Cartwright). He is in favour of the right of councils to levy supplementary rates but is against the GLC's doing so.
The GLC's sums were pretty good. The supplementary rate for my London accommodation was £30 for a financial year. Under the "Fares Fair" scheme, I paid 30p to come by underground from my home to the House of Commons. I now pay 60p. Under "Fares Fair", 100 journeys covered the £30 supplementary rate. I am very

much out of pocket, because I must now pay 60p a journey instead of 30p. People who live on the outskirts of London or elsewhere and who wondered why they should contribute now know the answer—because they had to bear the cost of the traffic jams and lost time when the underground closed down.
Not only am I in favour of the principle of supplementary rates; I am also in favour of such rates being levied by Labour authorities that have been elected on a policy to improve and protect services and to stop Government-imposed cuts that necessitate supplementary rates.
The trouble with which the proposed legislation attempts to deal is the direct result of that new phenomenon in local government—supplementary rates. We did not have supplementary rates until the present Government were elected and started to cut rate support grant. The supplementary rate was used sparingly in exceptional circumstances. Suddenly, there is a bout of supplementary rate demands because the Government are cutting rate support grant to local authorities by massive amounts. This debate is really about cutting public expenditure—dramatic cuts that cause not the Labour-controlled authorities but the people whom they serve to suffer. That includes the elderly, the disabled and those who use the social services. By their cuts in public expenditure, the Government are handing the care of the elderly and the disabled to ''Reports Action" and Jimmy Savile and taking it away from local authorities.
Hon. Members have mentioned the principle of local government democracy and democracy itself. That is the right of people to elect local authorities on a policy of having either poor services and low rates or higher rates and better services. Local elections are fought on those issues. People go along on polling day and put a cross on a ballot paper so that they can have some say in how their rates are applied. By the proposed legislation, the Government would take away those rights, not from local authorities but from those who vote in local elections. Those rights are being handed to the Secretary of State, the statute book and the courts. If local authorities—Conservative as well as Labour—protest, defenders of democracy among Conservative Members should also protest
The amendment provides flexibility to reduce rates if one is elected on a policy of reducing rates, but it provides no other flexibility. The Government would not listen to what Labour Members said in Committee. We wanted flexibility that would enable local authorities to raise their rates if the Government withdrew grants through clawback or super-holdback. The Government would not grant that flexibility. We wished local authorities to be given the chance to review their position half-yearly but that was also denied them.
Then there is the problem of how local authorities cope with increasing interest rates. Government policies might cause interest rates to rise, which will affect the budgets of local authorities and throw them completely out of balance. The proposals provide no flexibility for local authorities to raise rates slightly to cover increased interest rates or any other unforeseen events that might arise during the year. They provide no flexibility either to allow local authorities to increase rates or to introduce a supplementary rate.
The Government appear to want the best of all worlds. As the hon. Member for Woolwich, East said, the


Government wish to have flexibility only if it is in line with their policies that are designed to hamstring and hamper local government. The Government have been floundering in trying to introduce those policies in a series of local government Bills and amendments. British local government was a democratic institution that was the envy of the world. The Government are trying to destroy it.

Mr. Robert Litherland: I was not a member of the Committee that discussed this Bill but I was a member of the Committee on the Local Government, Planning and Land Act 1980.
The thread of discontent evident in today's speeches was obvious in that Committee. That discontent is voiced on both sides of the House. Conservative Members, especially those who have served on local authorities and who cherish the democratic traditions that prevailed when they were elected, say that those democratic traditions are now being violated by the Secretary of State, with the support of the House of Lords in the amendments. The Secretary of State is shifting power from locally elected representatives to central Government and to the dictates of Whitehall. The weapon that he intends to use is finance. The advice and the protests from local authorities, organisations such as the Association of Metropolitan Authorities and the Association of County Councils and from Conservative Back-Bench Members go unheeded by the Secretary of State in his determination to control local government.
The proposal that the Government should give local authorities more autonomy is nonsense; it is a sham and smacks of double standards. It is all very well to claim that expenditure decisions are for the local councillors, but the Secretary of State has the power to refuse grants where he believes that expenditure is excessive. Who knows what is best for the citizens of an authority—the local councillors, the Secretary of State or others? If the local electors believe that the rates are too high they can remove the controlling party from office. That is their democratic right. It is preferable to a remote authority in Westminster or Whitehall dictating what is best for them. The autonomy offered to local authorities must work within the restrictions imposed from above. So much for freedom and democracy.
In the Bill the Secretary of State is saying that locally elected representatives are not competent to make decisions that affect their authority. They must be accountable to him and not to those who voted them into office to make decisions on their behalf. The Bill changes the role of local councillors from decision-makers to administrators and puppets of the Secretary of State for the Environment.
Since taking office in 1979, the Government's policy has been to impose massive cuts on public spending and to penalise any local authority that refuses to be dictated to by central Government. Since 1979, the Government have reduced rate support grant, leaving councillors with the unenviable task of cutting services or increasing rates. Now the Secretary of State is introducing a Bill, supported by the House of Lords, that will make it impossible for local authorities to do other than make major cuts in vital services. If they do not, they will be singled out as overspenders and the Secretary of State will have the power to remove grants. The authority cannot levy a

supplementary rate or borrow to make up a deficiency in its budget. Civil servants, who work out every penny, will assess what they believe are the needs of the local authority. The local councillors cannot decide what should be spent. That is an extremely complicated exercise because each local authority has differing needs.
The local people know what is best for them. To break that tradition takes us down a dangerous and unhealthy path. Because of the Government's financial ceilings and powers of clawback, my local authority in Manchester must make drastic cuts that will affect those who rely most on its services. The effect is increased because of our present economic state. My constituency is an inner city area. It cannot be denied that we have above-average unemployment, single-parent families, elderly and disabled people, youth unemployment and low-paid workers. Those services are essential to the well-being of those citizens and the people that I represent. They are part of their social wage. To deny that is to place the whole burden on the backs of people who can ill afford to pay.
6 pm
Education, house building, social services and environment—every service—will be hit by a Tory Government hell-bent on tearing the heart out of local democracy. The people that I represent will suffer most. As if the demoralisation of the past has not been enough, this legislation will limit the amount that councils can spend and will ensure that greater hardship is placed on inner city areas that are now struggling for survival. Inner city areas are now experiencing social and economic deprivation. Councils are finding it increasingly difficult to meet new demands upon their services.
The Secretary of State suddenly realised that Merseyside existed, not because he was a caring person, but because rioting had broken out on the streets. Rioting has broken out also on the streets of Manchester. It is the manifestation of the social deprivation that is experienced by young unemployed people. Those riots were a retaliation against appalling living conditions. Those conditions are being made worse by the limited power of local authorities to meet their everyday needs.
The Tories have a class mentality that makes them believe that they have the divine right to tell other people what they need without experiencing need themselves. Many Tories have never had experience in local government. How many of their children have relied on free school meals? How many of them have waited on a council house list or required any welfare services? The Secretary of State for the Environment, by the power vested in him, automatically knows what people in various constituencies need; therefore he makes the decision.
The people in most need will be the ones to make the most sacrifices. Every local authority must oppose the Bill because it removes their democratic rights. The Bill breaks the constitutional partnership between central and local government. Any Conservative Member who has served as a local councillor is aware of the consequences of the Secretary of State's policies. Many Conservative Members must flinch at the severity of the policies. They may even join us in the Lobby for the sake of their consciences and of local government.

The Under-Secretary of State for the Environment (Mr. Giles Shaw): We on the Government Benches take a different view of the amendments. They are part of an enactment that we bring before the House to ensure that


ratepayers will suffer less in future than they have in the past. That is the meaning behind the Local Government Finance (No. 2) Bill, and in essence the meaning behind some of the amendments.
The right hon. Member for Widnes (Mr. Oakes) made it clear that he was not interested in the amendments which related to the GLC-Bromley case, but they are important to many of us on this side. Nor was the right hon. Member interested in the amendments that my hon. Friend the Member for Reading, North (Mr. Durant) introduced in Committee to allow local authorities to reduce the rates. That can be important. The right hon. Member for Widnes was naturally concentrating his attention on what one might call the Bedfordshire amendments. He raised two matters to which I wish to respond.
The first is the use of judicial review under clause 14. I reassure the right hon. Gentleman that judicial review is a special procedure for challenging decisions in the High Court on any of the grounds provided by administrative law. It is not some new and peculiar procedure introduced by that clause. He also raised the question of a minor part of the rate being declared invalid by such a procedure. I assure him that if there is a minor element of illegality the court would not necessarily quash the whole rate. The remedies by way of judicial review are discretionary. The clause does not affect the court's discretion. Clause 14(3) provides that if the court decides to grant relief it shall quash the rate. There is a significant element of discretion quite apart from the administrative mechanics of the law itself.
The main worry shown by the Opposition has been about local democracy, and the extent to which the proposals will be seen as a major threat to it. As it was put in Committee and in another place, bearing in mind what occurred in Committee, action was promised on 25 March by my right hon. Friend the Minister for Local Government and Environmental Services to make it clear that what was happening in Bedfordshire would ultimately be declared invalid when the Bill was enacted. That action was necessary and Labour Members said in Committee that it should be taken by the Government. That action has now been put into the Bill by the amendment made in another place.
It is essential to produce that clarification, and it is essential to clarify those points of rating law that apply to the GLC-Bromley case. The House could not proceed with a measure that did not contain such sorely needed clarification.
I regret the fact that the Opposition seek to ignore the importance of clarifying law. The process in Committee is to bring about a better version of this measure. The Government sought to meet genuine circumstances that had arisen.
I am grateful to my hon. Friends the Members for Bedfordshire, South (Mr. Madel) and for Luton, West (Mr. Carlisle) who unreservedly supported the way in which the Bill is drafted. I sincerely hope that my right hon. and hon. Friends will agree with the Lords in the said amendments.

Mr. Oakes: I am grateful for the clarification of the term "judicial review" in Lords amendment No. 4 and the information that the court would not necessarily have to quash the whole rate if only a technical matter was involved.
The Minister has omitted to discuss what has been the keynote of r early every Opposition speech—retrospection. We do not like retrospective legislation. I was astonished at the arrogance of the hon. Members for Bedfordshire, South (Mr. Madel) and Luton, West (Mr. Carlisle). They were saying that one should not do what the Government do not like. There is no need for a law to be passed: if one knows that the Government do not like something, one should not do it in the first place.
A great deal has been said about the state of mind of Bedfordshire county councillors between February and March, and how they arrived at their decision. I regret that I do not have the actual letter that the chief executive sent, but I can quote from Hansard. The letter was read in Committee and I hope that it will be acceptable to the House if I quote from the record. Paragraph 4 of the letter states:
It is doubtful whether the present terms of clause 2 (which deals with precepts) would, if passed into law, achieve the result intended by the Government. It is considered more likely that a court would hold that it was not retrospective in its effect, so as to overturn things already done which were lawful at the time. This view cannot be put forward with certainty but it is based on the legal principles which require strict interpretation of any statute which is claimed to operate retrospectively. The doubt about it must mean that there is some chance of a supplementary precept being challenged at law, after the proposed act has received the Royal Assent. This may not be until June or later."—[Official Report, Standing Committee D, 16 March 1982; c. 766.]
How perspicacious that chief executive was. It was not in the original Bill because an amendment had to be tabled in the other place to put the matter right. He was even right as to the date of the Bill. It is now 7 July, and the Bill is still not law. It is not the law of the land that Bedfordshire was wrong at the time. All that Bedfordshire did wrong was to fly in the face of the diktats of the Secretary of State for the Environment and his Minister.
I ask hon. Members from all parts of the House to vote against this retrospective legislation.

Question put, That this House doth agree with the Lords in the said amendment:—

The House divided: Ayes 277, Noes 225.

Division No. 260]
[6.10 pm


AYES


Adley, Robert
Braine, Sir Bernard


Aitken, Jonathan
Bright, Graham


Alexander, Richard
Brinton, Tim


Alison, Rt Hon Michael
Brittan, Rt. Hon. Leon


Amery, Rt Hon Julian
Brooke, Hon Peter


Ancram, Michael
Brotherton, Michael


Arnold, Tom
Brown, Michael (Brigg &amp; S Sc'n)


Aspinwall, Jack
Browne, John (Winchester)


Atkins, Rt Hon H. (S'thorne)
Bruce-Gardyne, John


Atkins, Robert (Preston N)
Bryan, Sir Paul


Baker, Kenneth (St.M'bone)
Buchanan-Smith, Rt. Hon. A.


Baker, Nicholas (N Dorset)
Buck, Antony


Banks, Robert
Budgen, Nick


Bendall, Vivian
Bulmer, Esmond


Benyon, W. (Buckingham)
Burden, Sir Frederick


Berry, Hon Anthony
Butcher, John


Best, Keith
Cadbury, Jocelyn


Bevan, David Gilroy
Carlisle, John (Luton West)


Biffen, Rt Hon John
Carlisle, Kenneth (Lincoln)


Biggs-Davison, Sir John
Carlisle, Rt Hon M. (R'c'n)


Blackburn, John
Chalker, Mrs. Lynda


Blaker, Peter
Channon, Rt. Hon. Paul


Body, Richard
Chapman, Sydney


Bonsor, Sir Nicholas
Churchill, W. S.


Boscawen, Hon Robert
Clark, Hon A. (Plym'th, S'n)


Bottomley, Peter (W'wich W)
Clark, Sir W. (Croydon S)


Bowden, Andrew
Clarke, Kenneth (Rushcliffe)


Boyson, Dr Rhodes
Cockeram, Eric






Colvin, Michael
Kimball, Sir Marcus


Cope, John
King, Rt Hon Tom


Cormack, Patrick
Knight, Mrs Jill


Corrie, John
Knox, David


Costain, Sir Albert
Lamont, Norman


Cranborne, Viscount
Latham, Michael


Critchley, Julian
Lawrence, Ivan


Crouch, David
Lawson, Rt Hon Nigel


Dickens, Geoffrey
Lee, John


Dorrell, Stephen
Lennox-Boyd, Hon Mark


Douglas-Hamilton, Lord J.
Lester, Jim (Beeston)


Dover, Denshore
Lewis, Kenneth (Rutland)


du Cann, Rt Hon Edward
Lloyd, Ian (Havant &amp; W'loo)


Dunn, Robert (Dartford)
Lloyd, Peter (Fareham)


Dykes, Hugh
Loveridge, John


Eden, Rt Hon Sir John
Luce, Richard


Edwards, Rt Hon N. (P'broke)
Lyell, Nicholas


Eggar, Tim
Macfarlane, Neil


Elliott, Sir William
MacGregor, John


Emery, Sir Peter
MacKay, John (Argyll)


Eyre, Reginald
Macmillan, Rt Hon M.


Faith, Mrs Sheila
McNair-Wilson, M. (N'bury)


Farr, John
McNair-Wilson, P. (New F'st)


Fell, Sir Anthony
Madel, David


Fenner, Mrs Peggy
Major, John


Finsberg, Geoffrey
Marlow, Antony


Fisher, Sir Nigel
Marten, Rt Hon Neil


Fletcher, A. (Ed'nb'gh N)
Maude, Rt Hon Sir Angus


Fletcher-Cooke, Sir Charles
Mawby, Ray


Fookes, Miss Janet
Mawhinney, Dr Brian


Forman, Nigel
Maxwell-Hyslop, Robin


Fowler, Rt Hon Norman
Mayhew, Patrick


Fraser, Peter (South Angus)
Meyer, Sir Anthony


Fry, Peter
Miller, Hal (B'grove)


Gardiner, George (Reigate)
Mills, Iain (Meriden)


Garel-Jones, Tristan
Miscampbell, Norman


Glyn, Dr Alan
Mitchell, David (Basingstoke)


Goodhart, Sir Philip
Moate, Roger


Goodhew, Sir Victor
Monro, Sir Hector


Goodlad, Alastair
Montgomery, Fergus


Gorst, John
Moore, John


Gow, Ian
Morgan, Geraint


Grant, Anthony (Harrow C)
Morrison, Hon C. (Devizes)


Gray, Hamish
Morrison, Hon P. (Chester)


Griffiths, Peter Portsm'th N)
Mudd, David


Grist, Ian
Murphy, Christopher


Gummer, John Selwyn
Myles, David


Hamilton, Hon A.
Neale, Gerrard


Hamilton, Michael (Salisbury)
Needham, Richard


Hampson, Dr Keith
Nelson, Anthony


Hannam, John
Neubert, Michael


Haselhurst, Alan
Newton, Tony


Havers, Rt Hon Sir Michael
Nott, Rt Hon John


Hawkins, Sir Paul
Oppenheim, Rt Hon Mrs S.


Hawksley, Warren
Osborn, John


Hayhoe, Barney
Page, John (Harrow, West)


Heath, Rt Hon Edward
Page, Richard (SW Herts)


Heddle, John
Parris, Matthew


Henderson, Barry
Patten, John (Oxford)


Heseltine, Rt Hon Michael
Pawsey, James


Hicks, Robert
Percival, Sir Ian


Higgins, Rt Hon Terence L.
Peyton, Rt Hon John


Hogg, Hon Douglas (Gr'th'm)
Pink, R. Bonner


Holland, Philip (Carlton)
Pollock, Alexander


Hooson, Tom
Porter, Barry


Hordern, Peter
Prentice, Rt Hon Reg


Howell, Rt Hon D. (G'ldf'd)
Price, Sir David (Eastleigh)


Howell, Ralph (N Norfolk)
Proctor, K. Harvey


Hunt, David (Wirral)
Raison, Rt Hon Timothy


Hunt, John (Ravensbourne)
Rathbone, Tim


Hurd, Rt Hon Douglas
Rees, Peter (Dover and Deal)


Irvine, Bryant Godman
Rees-Davies, W. R.


Irving, Charles (Cheltenham)
Renton, Tim


Jenkin, Rt Hon Patrick
Rhodes James, Robert


Jessel, Toby
Ridley, Hon Nicholas


Johnson Smith, Sir Geoffrey
Ridsdale, Sir Julian


Jopling, Rt Hon Michael
Rifkind, Malcolm


Joseph, Rt Hon Sir Keith
Roberts, Wyn (Conway)


Kershaw, Sir Anthony
Rossi, Hugh


Kilfedder, James A.
Rost, Peter





Royle, Sir Anthony
Thornton, Malcolm


Sainsbury, Hon Timothy
Townend, John (Bridlington)


St. John-Stevas, Rt Hon N.
Trippier, David


Shaw, Giles (Pudsey)
Trotter, Neville


Shaw, Sir Michael (Scarb')
van Straubenzee, Sir W.


Shepherd, Colin (Hereford)
Vaughan, Dr Gerard


Shepherd, Richard
Viggers, Peter


Shersby, Michael
Waddington, David


Silvester, Fred
Wakeham, John


Sims, Roger
Waldegrave, Hon William


Smith, Dudley
Walker, Rt Hon P.(W'cester)


Smith, Tim (Beaconsfield)
Waller, Gary


Smyth, Rev. W. M. (Belfast S)
Walters, Dennis


Speed, Keith
Ward, John


Spence, John
Watson, John


Spicer, Michael (S Worcs)
Wells, Bowen


Squire, Robin
Wells, John (Maidstone)


Stainton, Keith
Wheeler, John


Stanbrook, Ivor
Whitelaw, Rt Hon William


Stanley, John
Whitney, Raymond


Steen, Anthony
Wickenden, Keith


Stevens, Martin
Wiggin, Jerry


Stewart, A. (E Renfrewshire)
Wilkinson, John


Stewart, Ian (Hitchin)
Williams, D. (Montgomery)


Stokes, John
Winterton, Nicholas


Stradling Thomas, J.
Wolfson, Mark


Tapsell, Peter
Young, Sir George (Acton)


Taylor, Teddy (S'end E)
Younger, Rt Hon George


Tebbit, Rt Hon Norman



Temple-Morris, Peter
Tellers for the Ayes:


Thomas, Rt Hon Peter
Mr. Carol Mather and Mr. Ian Lang.


Thompson, Donald



Thorne, Neil (Ilford South)



NOES


Abse, Leo
Davidson, Arthur


Adams, Allen
Davies, Rt Hon Denzil (L'lli)


Alton, David
Davis, Clinton (Hackney C)


Anderson, Donald
Deakins, Eric


Archer, Rt Hon Peter
Dean, Joseph (Leeds West)


Ashley, Rt Hon Jack
Dewar, Donald


Ashton, Joe
Dixon, Donald


Atkinson, N. (H'gey,)
Dobson, Frank


Bagier, Gordon A. T.
Dormand, Jack


Barnett, Guy (Greenwich)
Douglas, Dick


Barnett, Rt Hon Joel (H'wd)
Dubs, Alfred


Beith, A. J.
Duffy, A. E. P.


Benn, Rt Hon Tony
Dunwoody, Hon Mrs G.


Bennett, Andrew (St'kp't N)
Eastham, Ken


Bidwell, Sydney
Edwards, R. (W'hampt'n S E)


Booth, Rt Hon Albert
Ellis, R. (NE D'bysh're)


Bottomley, Rt Hon A. (M'b'ro)
Ellis, Tom (Wrexham)


Bradley, Tom
English, Michael


Bray, Dr Jeremy
Ennals, Rt Hon David


Brocklebank-Fowler, C.
Evans, Ioan (Aberdare)


Brown, Ronald W. (H'ckn'y S)
Evans, John (Newton)


Buchan, Norman
Ewing, Harry


Callaghan, Rt Hon J.
Faulds, Andrew


Callaghan, Jim (Midd't'n &amp; P)
Flannery, Martin


Campbell, Ian
Fletcher, Ted (Darlington)


Campbell-Savours, Dale
Foot, Rt Hon Michael


Canavan, Dennis
Forrester, John


Cant, R. B.
Foster, Derek


Carmichael, Neil
Foulkes, George


Cartwright, John
Fraser, J. (Lamb'th, N'w'd)


Clark, Dr David (S Shields)
Freeson, Rt Hon Reginald


Clarke, Thomas C'b'dge,
Freud, Clement


A'drie
Garrett, John (Norwich S)


Cocks, Rt Hon M. (B'stol S)
Garrett, W. E. (Wallsend)


Coleman, Donald
Ginsburg, David


Cook, Robin F.
Graham, Ted


Cowans, Harry
Grant, John (Islington C)


Cox, T. (W'dsw'th, Toot'g)
Grimond, Rt Hon J.


Craigen, J. M. (G'gow, M'hill)
Hamilton, James (Bothwell)


Crowther, Stan
Hamilton, W. W. (C'tral Fife)


Cryer, Bob
Hardy, Peter


Cunliffe, Lawrence
Harrison, Rt Hon Walter


Cunningham, G. (Islington S)
Hattersley, Rt Hon Roy


Cunningham, Dr J. (W'h'n)
Haynes, Frank


Dalyell, Tam
Healey, Rt Hon Denis






Heffer, Eric S.
Pendry, Tom


Hogg, N. (E Dunb't'nshire)
Penhaligon, David


Holland, S. (L'b'th, Vauxh'll)
Powell, Raymond (Ogmore)


Homewood, William
Prescott, John


Hooley, Frank
Price, C. (Lewisham W)


Howell, Rt Hon D.
Race, Reg


Howells, Geraint
Radice, Giles


Hoyle, Douglas
Rees, Rt Hon M (Leeds S)


Huckfield, Les
Richardson, Jo


Hughes, Mark (Durham)
Roberts, Allan (Bootle)


Hughes, Robert (Aberdeen N)
Roberts, Ernest (Hackney N)


Hughes, Roy (Newport)
Roberts, Gwilym (Cannock)


Jay, Rt Hon Douglas
Robertson, George


John, Brynmor
Robinson, G. (Coventry NW)


Johnson, James (Hull West)
Rodgers, Rt Hon William


Johnson, Walter (Derby S)
Rooker, J. W.


Jones, Rt Hon Alec (Rh'dda)
Roper, John


Jones, Barry (East Flint)
Ross, Ernest (Dundee West)


Kaufman, Rt Hon Gerald
Ross, Stephen (Isle of Wight)


Kerr, Russell
Rowlands, Ted


Kinnock, Neil
Ryman, John


Lambie, David
Sandelson, Neville


Lamborn, Harry
Sever, John


Leadbitter, Ted
Sheldon, Rt Hon R.


Lestor, Miss Joan
Shore, Rt Hon Peter


Lewis, Arthur (N'ham NW)
Short, Mrs Renée


Lewis, Ron (Carlisle)
Silkin, Rt Hon J. (Deptford)


Litherland, Robert
Silkin, Rt Hon S. C. (Dulwich)


Lofthouse, Geoffrey
Silverman, Julius


Lyon, Alexander (York)
Skinner, Dennis


Mabon, Rt Hon Dr J. Dickson
Spearing, Nigel


McCartney, Hugh
Stallard, A. W.


McDonald, Dr Oonagh
Steel, Rt Hon David


McElhone, Frank
Stoddart, David


McGuire, Michael (Ince)
Stott, Roger


McKay, Allen (Penistone)
Strang, Gavin


McKelvey, William
Straw, Jack


MacKenzie, Rt Hon Gregor
Summerskill, Hon Dr Shirley


McNally, Thomas
Taylor, Mrs Ann (Bolton W)


McNamara, Kevin
Thomas, Dafydd (Merioneth)


McTaggart, Robert
Thomas, Dr R. (Carmarthen)


McWilliam, John
Thorne, Stan (Preston South)


Marks, Kenneth
Tilley, John


Marshall, D (G'gow S'ton)
Tinn, James


Marshall, Dr Edmund (Goole)
Torney, Tom


Marshall, Jim (Leicester S)
Wainwright, E. (Dearne V)


Maxton, John
Wainwright, R. (Colne V)


Maynard, Miss Joan
Walker, Rt Hon H. (D'caster)


Meacher, Michael
Watkins, David


Mellish, Rt Hon Robert
Weetch, Ken


Millan, Rt Hon Bruce
Wellbeloved, James


Miller, Dr M. S. (E Kilbride)
Welsh, Michael


Mitchell, Austin (Grimsby)
White, Frank R.


Mitchell, R. C. (Soton Itchen)
White, J. (G'gow Pollok)


Morris, Rt Hon A. (W'shawe)
Whitehead, Phillip


Morris, Rt Hon C. (O'shaw)
Whitlock, William


Morris, Rt Hon J. (Aberavon)
Wigley, Dafydd


Moyle, Rt Hon Roland
Willey, Rt Hon Frederick


Mulley, Rt Hon Frederick
Williams, Rt Hon A. (S'sea W)


Newens, Stanley
Wilson, Rt Hon Sir H. (H'ton)


Oakes, Rt Hon Gordon
Wilson, William (C'try SE)


Ogden, Eric
Winnick, David


O'Neill, Martin
Woodall, Alec


Orme, Rt Hon Stanley
Woolmer, Kenneth


Owen, Rt Hon Dr David
Wright, Sheila


Palmer, Arthur
Young, David (Bolton E)


Park, George



Parker, John
Tellers for the Noes:


Parry, Robert
Mr. George Morton and


Pavitt, Laurie
Mr. Ron Leighton.

Question accordingly agreed to.

Lords amendments Nos. 2 to 4, 7, 26, 28 and 30 agreed to.

Clause 4

ADJUSTMENTS OF DISTRIBUTION OF BLOCK GRANT

Lords amendment: No. 8, in page 3, line 8, leave out from "(cc)" to "any" in line 10 and insert.
making, in the amount of block grant payable to an authority, adjustments by reference to guidance issued by the Secretary of State and designed to achieve

Mr. Giles Shaw: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this it will be convenient to take Lords amendments Nos. 9 and 11.

Mr. Shaw: Will it be to your convenience, Mr. Deputy Speaker, to take at the same time Lords amendments Nos. 10 and 12?

Mr. Gerald Kaufman: Pershaps it will assist you, Mr. Deputy Speaker, if I say that that is agreeable to the Opposition.

Mr. Deputy Speaker: There appears to be general agreement in the House that we should take together Lords amendments Nos. 8, 9, 11, 10 and the proposed amendment thereto, and 12.

Mr. Shaw: I am grateful to you, Mr. Deputy Speaker, for allowing us to consider all these amendments together, because they are related, either closely or slightly distantly. They are primarily drafting improvements designed to express more clearly the way in which holdback will work. I refer here to amendments Nos. 8, 9 and 11.
Clause 4, as it left the House, said that the purpose of the holdback multipliers was to achieve any reductions in local authority expenditure which my right hon. Friend the Secretary of State thinks necessary, having regard to the general economic circumstances. That is the Government's general objective, and it is the reason for giving targets and for the creation of the holdback scheme. On further consideration, we think that it is more accurate to say that it is the guidance or the targets that are designed to achieve the desired reduction in local authority expenditure. Holdback and holdback multipliers are then designed to adjust grant entitlements in such a way as to provide authorities with a financial incentive to comply with the guidance or targets.
Amendment No. 8 accordingly makes it plain that the purpose of holdback multipliers is to adjust grant by reference to guidance issued by my right hon. Friend, and that it is the purpose of the guidance to reduce the level of local government expenditure.
Amendments Nos. 9 and 11 are consequential. Amendment No. 9 preserves the restriction on the guidance—that it should be framed by reference to principles applicable to all authorities—but transposes it from subsection (1) to subsection (2). Amendment No. 11 is consequential on amendment No. 9, which moves that reference to principles from subsection (1) to subsection (2). It ensures that the guidance issued in respect of 1981–82 and 1982–83 must still conform with general principles.
Amendment No. 10 is about exemptions from holdback. The House will recall that when, in June last year, my right hon. Friend the Secretary of State first announced detailed proposals for the reduction of rate support grant he said that he proposed to exempt from the


effects of the proposed overall reduction those authorities which planned to spend within their current expenditure target. In September, in response to the many representations that he received, he agreed to exempt in addition those authorities which spent at or below their GRE and to disregard certain categories of urban programme expenditure and expenditure incurred as a result of the civil disturbances last summer. Since then, my right hon. Friend—also in response to representations—has agreed to disregard expenditure resulting from the winter's bad weather, and he has agreed to extend the GRE exemption to 1982–83.
All these exemptions extend the scope of protection. They all reduce, rather than increase, the incidence of holdback. They all represent a response to representations made by, or on behalf of, the authorities themselves. However, the Bill as originally drafted did not make specific provision for any such exemptions. In view of the importance that we attach to the ability to respond to representations in this way, we felt that it was prudent—more than prudent, essential—to put the question beyond all possible doubt by moving this amendment in another place. For the same reason, I ask the House to agree to the amendment.
Amendment No. 12 simply corrects a deficiency in the clause, which arose as a result of the passage of time since this part of the Bill was drafted. Subsection (10), as it stands, provides that, in relation to 1981–82, references to guidance are to include references to guidance issued before the passage of the Act. Guidance in relation to 1982–83 had to be issued before authorities finalised their budgets, and a final version was issued last February. The amendment extends the provision to cover 1982–83.
I ask the House to agree with the Lords in the said amendments.

Mr. Harry Cowans: On a point of order, Mr. Deputy-Speaker. Did the Minister move amendment No. 10 together with amendments Nos. 8, 9 and 11 or did he only refer to amendment No. 10 and not move it?

Mr. Deputy-Speaker (Mr. Bernard Weatherill): I have proposed amendment No. 8 with which, I understand, it is convenient to take amendments Nos. 9, 10, 11 and 12. They will be moved when they are reached on the Amendment Paper.

Mr. Kaufman: Having listened to the Under-Secretary of State just now and to the Minister in the earlier debate I sometimes wonder whether we are living in the same world. They have moved, briefly and cursorily, that this House agree with amendments which do great violence to legislation and to the way in which local authorities proceed. They always speak to the amendments as if they were little technicalities. Amendment No. 12, for example, is the retrospective validation of holdback for this year. We are told that the other amendments are drafting corrections. To the Government a drafting correction means penalising local authorities and backdating the date of the penalty. The Government call that a drafting correction.
In Committee we spent a great deal of time on clause 4, which was the heart of the badness of the Bill and

remains so. When the hon. Member for Hornchurch (Mr. Squire) tabled amendments which were accepted we were under the impression that although much of the clause remained bad and uncorrected, a major advance had been made in dealing with one of its worst aspects—making super-holdback impossible. Amendments have now been inserted by the House of Lords which bring back the right to impose super-holdback—Interruption —I shall ask the Government for certain assurances and the best way that they can validate those assurances is by accepting the amendment tabled by the hon. Member for Devizes (Mr. Morrison) to Lords amendment No. 10. If the Government accept that amendment, some of our misgivings will be removed. The protest that we just heard from the Minister can be judged by how he reacts to the amendment moved by his hon. Friend which, as he knows, has the support of the Association of County Councils, which has asked all hon. Members to support the amendment.
The group of amendments is unsatisfactory for other reasons. We wish to ask a number of important questions and I hope we shall have the attention of Ministers. The Opposition believe that clause 4 is not only bad but, having been improved in Committee and on Report, it has been seriously worsened by what has been done in the House of Lords. I understand why that has come about. On this occasion we acquit the Government of malice, but because of commitments that they made and a rash move of theirs, they have sought to amend the Bill to validate those commitments. We all know that it was so difficult for them to draft amendments which would validate their commitments that they have redrafted the clause in a way which restores to it some of the worst features that existed when we entered Committee in January. What is more, we have serious suspicions—I shall be raising them in detail—about how the Government may be misusing the amendments which they inserted in another place and to which the House is asked to give approval.
The clause continues to be unsatisfactory to the Opposition and to the Government, who have now made four attempts to improve it. The Government introduced the clause and amended it in response to amendments from the hon. Member for Hornchurch—amendments which we supported and, which because of our support, had to be conceded. Within hours of the Government's amendments being made public they were found to be seriously faulty. The amendments had to be withdrawn and new ones were tabled. Now the Government are amending the clause all over again.
In the previous debate my right hon. Friend the Member for Widnes (Mr. Oakes) rebuked the Government for what they were doing in the amendments relating to the Bedfordshire supplementary rate. My right hon. Friend said that by those amendments the Government were retrospectively making illegal what was legal when it was done. The clause and the amendments retrospectively make legal what was illegal when it was done.
Holdback, with which the clause deals, has been operating unlawfully for a year. At the beginning of June 1981 the Secretary of State made his statement about holdback, requiring that budgets be returned by the end of July. We now know—it has been admitted; the existence of the clause admits it—that the Secretary of State had no legal right to introduce that holdback operation. He had no legal right to introduce the guidance. That is why the


clause retrospectively validates the guidance. He had no legal right to threaten the penalties and that is why the clause retrospectively validates the penalties.
For a year and more, under the holdback operation, the Secretary of State has been demanding money with menaces from the local authorities. Clause 4 seeks to achieve the impossible—to make an honest man of the Secretary of State for the Environment, even though retrospectively. We had the famous use of the word "clarify" for which the Minister for Local Government and Environmental Services has claimed credit. He has admitted that "clarify" is his word. We are told that clause 4 of the Bill will clarify the powers used under the holdback operation. Under my Anglo-Heseltinese dictionary, which I hope will be published as a supplement to the Official Report, we will now see the work "clarify" defined as "to make legal retrospectively that which was illegal when it was originally done by the Secretary of State for the Environment".
The Secretary of State instituted that holdback operation 13 months ago, believing that section 59(6)(d) of the Local Government, Planning and Land Act 1980 empowered him to do so. That section, which dealt with the adjustment of the distribution of block grant, provided that the Secretary of State could use his powers for
any such other purpose as the Secretary of State may determine.
As happens so often with the Secretary of State, it turned out that he exercised the power first and found out later that he had no legal right to do it.
Last year's holdback exercise has to be validated and so does this year's exercise, which is equally unlawful at the moment. Last year's exercise was found to be unsatisfactory to Conservative local authority associations. That is why, at the last moment, almost as an afterthought, the Government introduced the grant-related expenditure assessment exemption. Having learnt that lesson, they decided this year to introduce the GREA exemption from the beginning.
It turns out that the GREA exemption was also unlawful and that the Secretary of State had no right to make the exemption last year and, until the Bill becomes law, has no right to make the exemption this year. The GREA exemption derives from the failure of the Secretary of State's attempts to control local authority spending in the current financial year. What is more, the right hon. Gentleman is responsible for a large part of the expenditure in excess of the ceilings that he has imposed.
The Secretary of State set spending ceilings for every local authority for the current financial year. Those ceilings were designed to achieve an overall reduction in local authority spending, with penalties for overspenders. The whole operation was unlawful.
The right hon. Gentleman was worried about a repetition of last year's events. He feared that the ceilings might result in penalties being imposed on too many Conservative-controlled local councils. Therefore, he decided that he would not penalise any local authority, even if its spending plans exceeded the ceiling, if it was not planning to spend above its GREA.
The GREAs are entirely artificial. The Minister for Local Government and Environmental Services has many things on his conscience and there is keen competition for what is the worst, but one must concede that the biggest stain on the right hon. Gentleman's record is his specific promise during the passage of the Local Government,

Planning and Land Act 1980 that GREAs would not be used as spending ceilings. The right hon. Gentleman broke that promise, and he and the Secretary of State have resorted to GREAs as alternative expenditure ceilings, because the manner in which they are calculated gives greater latitude to Conservative-controlled councils.
Until the Bill, with the Lords amendments, becomes law, the use of GREAs as an alternative target is not only politically discriminatory, but unlawful. It is not provided for in current legislation and it will be made lawful only as a result of the amendments before us.
Lawful or not, the GREA. exemption has created havoc with the Government's expenditure controls. Of the 411 local authorities in England, only 138 are budgeting to spend at or below the ceilings assigned to them by the Secretary of State. The other 273—two-thirds of the total—are budgeting to overspend, on the Secretary of State's criteria. Of the 273 that the Secretary of State denounces as overspenders, 152–57 per cent. of the total—are Conservative-controlled and only 97 are Labour-controlled.
The total alleged net overspend is £1,448,745,000. Those of us who criticised the proposed amnesty for councils spending above the expenditure ceiling, but below GREA, predicted that many councils would be tempted to spend above their ceilings if those were below their GREAs. Our predictions were derided by Ministers, but they have turned out to be justified.
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Figures that the Secretary of State has had to publish—he did not volunteer them, but they were forced out of him—and which we have carefully analysed, show that of the net overspend, no less than £405,452,000 is incurred by councils spending above their ceilings, but below their GREAs. That means that although those councils are overspending by massive sums they will suffer no penalty.
It is interesting that of the 273 councils that are spending above their ceilings, more than half—142—will not be penalised. The political bias with which the system is being operated is quite blatant. Of the 152 Conservative councils spending above their ceilings, 34 will be penalised, and 118 will not. Of the 97 Labour councils spending above their ceilings, 82 will be penalised and 15 will not.
The anomalies are grotesque by any standards. In the county of Avon, the Conservative-controlled Kingswood council is spending 36·7 per cent. above its ceiling, but will not be penalised. Bristol, at 1·6 per cent. above its ceiling, will be penalised. In Derbyshire, the Conservative-controlled West Derbyshire council, at 10·4 per cent. above its ceiling, will not be penalised, but the Labour council in North-East Derbyshire, which is only 0·1 per cent. above its ceiling, will be penalised.
In Nottinghamshire, the Conservative council at Gedling, at 15·7 per cent. above its ceiling, will not be penalised. Mansfield, a Labour council, is 6·9 per cent. above its ceiling and will be penalised. In Warwickshire, the Conservative Warwick council is spending 8·4 per cent. above its ceiling and will not be penalised, but the Labour council at Nuneaton, spending 1·2 per cent. above its ceiling, will be penalised.
The Conservative-controlled Mid-Devon council, at 22·5 per cent. above its ceiling, will not be penalised, but


Wye Forest, in Hereford and Worcester, where there is no majority, is spending 4·3 per cent. above its ceiling and will be penalised.
Of the great cities, Leeds, a Labour council, is spending 7·9 per cent. above its ceiling, but will not be penalised. Manchester, another Labour council, is 1·3 per cent. above its ceiling and will be penalised. Among the counties, Hampshire, a Conservative-controlled council, is 4·6 per cent. above its target and will not be penalised—nor will Northamptonshire, which has no majority, and is spending 12 per cent. above its ceiling, or Leicestershire, which also has no majority, and is spending 11·1 per cent. above its ceiling, but Northumberland, a Labour council spending 3·4 per cent. above its ceiling, will be penalised.

Mr. Den Dover: I do not blame the right hon. Gentleman for picking out figures that show that Labour authorities are being penalised and Conservative councils are not being penalised, but has he taken selective statistics or is he covering the whole range?

Mr. Kaufman: The hon. Gentleman is welcome to go to the Library and look at the document that was placed there by the Secretary of State in answer to a written question of mine. The information would not have been revealed if I had not put that question to him. The hon. Gentleman will see that these are but a few examples. I would weary the House if I gave more detail. That is how it has worked out. I have tried to pick areas which are geographically proximate so that the unfairness is even more obvious.

Mr. King: The right hon. Gentleman has chosen to present the figures in that way, but does he agree that if my hon. Friend the Member for Chorley (Mr. Dover) consults the document in the Library, he will find that the authorities that are being penalised are consistently spending a considerably higher amount per head and that those that are not being penalised are spending a consistently lower amount per head? As he has the figures, would he give us the expenditure per head for Kingswood and Bristol and say why one is being penalised and the other is not?

Mr. Kaufman: I am grateful to the Minister for intervening. We now have a new criterion on which councils have not been asked to base their expenditure cuts. The House can refer to the report of the debate in January. In the mad, demented document which works out how the target shall be obtained, there is nothing about expenditure per head.
The Government have worked out a spending target. They have told local authorities that if they go beyond that target they will be penalised, regardless of expenditure per capita. They then brought in the GREA exemption, because they were terrified that too many Tory authorities would be penalised. Indeed, they have managed that piece of political legerdemain quite neatly.
If there are legal actions, what the Minister has said is extremely important. He is now saying that all the other targets do not matter—only expenditure per capita. In addition to the document deposited in the Library, which I recommend the hon. Member for Chorley to look at, let the Minister give us the expenditure per capita. Those

figures are not published. Therefore, we cannot judge them. The Minister was seriously misguided to make that intervention. That is not the issue that we are facing.
The enormous overspend of nearly £1·5 billion—on the Secretary of State's criteria; I do not accept that there is an overspend—shows that he has failed to control local authority expenditure. However, he has succeeded in creating a system of discriminatory penalties which are lacking in logic and justice and can be explained only by the motivation of political malice.
Amendment No. 10 validates the GREA exemption, which makes that piece of political legerdemain possible. Because other exemptions were needed, the drafting is now so wide that the Secretary of State can excuse from penalty whatever local authority makes a representation to him. From a Department which, under the Conservatives, has been adept over the years at planted questions, we now have the new development of planted representations. A local authority which the Secretary of State does not wish to penalise can be told to come along and make representations under the amendments. It will then be let off.
I understand that the Minister will reply to the debate. Therefore, I have several questions to which I should like him to pay attention because we want his replies. We are now told that we have a system of exemptions, partly to fulfil the Government's undertaking, for which I pressed when we had the debates on the riots. In order that we may have those exemptions, we have the amendment.
I want a categorical assurance from the Government that this exemption amendment will not be used to introduce super-holdback by the back door. Hon. Members will have seen the document from the Association of County Councils. I have discussed it frequently with all three local authority associations. It is their view that super-holdback—a mid-year differential holdback—is now again possible by the Government imposing the overall holdback—which they already had power to do, as I accepted in Committee—imposing a mid-year holdback and inviting applications for exemption. In that way they will operate a super-holdback by a holdback from which there are exemptions for favoured local authorities.
First, I want from the Minister a categorical assurance that they do not intend to do that. Better than a categorical assurance would be acceptance of the amendment tabled by the hon. Member for Devizes because that would be much more helpful.
Secondly, we come to the treatment of Wales. I am glad that the Secretary of State for Wales is present. I only wish that the Secretary of State for the Environment were still here. He popped in for three-quarters of an hour, found it all too much, and disappeared—heaven knows where.

Mr. Tristan Garel-Jones: The right hon. Gentleman should get on with his speech.

Mr. Kaufman: I went off to a meeting of the shadow Cabinet where great affairs of State were discussed. I had a note made by my hon. Friend the Member for Coventry, North-West (Mr. Robinson). He observed that I left at 4.15 and that the Minister left at 5 o'clock precisely.
The hon. Member for Watford (Mr. Garel-Jones) should have learnt by now that the role of a Whip is to be utterly silent. I suggest that he sends a message to the Secretary of State for the Environment saying that he is


wanted again so that, even though he has done little work on the Bill, he may, in its final stages, listen a bit more to what he has done. It is the poor Minister who has all the work. I shall report the Whip's heckling to the Patronage Secretary.
Wales is of exceptional importance. The good faith of the Minister and of the Government is at stake. When the Minister made his statement on 2 February about super-holdback, he said that the amendments to prevent super-holdback, for reasons which he explained and which we accepted, could operate only from the financial year 1983–84. That being so, he gave us a pledge, which I shall read to the House. He said:
In regard to 1982–83, I can, therefore, give a specific assurance to the Committee that we do not intend to operate a differential holdback scheme in England of any greater severity than that already announced on 21 December."—[Official Report, Standing Committee D,2 February 1982; c. 73.]
Either the Minister was being deliberately disingenuous or he meant what he said. As the Bill related to England and Wales, we took it that the commitment on super-holdback referred to all the authorities covered by it. If the Minister did not specifically mean to include Wales in his assurance, he should have been honest and open with the Committee and said that Wales would not be covered. It was not enough to say that it applied to England. He should have said that the commitment did not extend to Wales. He did not say that. Therefore, we took it that Wales was covered by his assurance.

The Secretary of State for Wales (Mr. Nicholas Edwards): For once, my political antennae were alert. I was passing calmly through the Chamber, not intending to stay, when I noticed the right hon. Member for Rhondda (Mr. Jones) lurking on the Opposition Front Bench. Being a suspicious individual, I thought that I would stay to see why.
I should point out to the right hon. Member for Manchester, Ardwick (Mr. Kaufman) that we have never had to operate a holdback in Wales. Therefore, the introduction of a system of holdback in Wales of greater severity than that already announced does not arise. We have not announced a system of holdback in Wales. Thanks to the good sense and co-operation of Welsh local authorities, I have not found it necessary to follow the course of action pursued in England.
I repeatedly warned local authorities in Wales at the consultative council and in the House that if they overspent we might have to operate a different system. That has always been clear. I have asked them to revise their budgets and I have told them that I will consider the matter when they have done so. There is no question of there being a holdback scheme of greater severity than that already announced. There has never been a holdback scheme in Wales. It is monstrous for the right hon. Gentleman to accuse my right hon. Friend of misleading the House when the holdback scheme applies to England, not to Wales. I cannot imagine why he should be so sloppy in his thinking as to believe that the system in England should apply to Wales.

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Mr. Kaufman: The right hon. Gentleman said that he entered the Chamber because he is a suspicious person. A suspect person would be a more apt way to describe him. He had a guilty conscience, and it led him to the scene of

his crime. The Secretary of State for the Environment, having no guilty conscience and too many scenes of crime, was unable to do the same thing.
If the Secretary of State for Wales is saying that local authorities in Wales have been good boys and that no holdback has been necessary, he should remember that on two occasions during Welsh Question Time my right hon. Friend the Member for Rhondda (Mr. Jones) has said that, in so far as there is a concept of overspending—a concept that I have repeatedly rejected—in percentage terms Welsh local authorities are overspending by a much smaller amount than English authorities. That is a fact and the right hon. Gentleman cannot deny it. I think that he will acknowledge that the overspend is 4·8 per cent.
The Department of the Environment has precluded a differential holdback in England, although the overspend in England is nearly double the overspend in Wales. Therefore, the right hon. Gentleman has to justify his decision to institute a penal procedure against Welsh local authorities which are continuing, on his criteria, to operate on a basis that is more acceptable to the Government than that of the English authorities.

Mr. Nicholas Edwards: I understand that the right hon. Gentleman is not fully familiar with what has happened in Wales. I have net decided to introduce a penal procedure. No decision has been taken. I said that I would like local authorities in Wales to deal with the matter themselves. They are currently reconsidering their budgets. I have told them that when I receive their revised budgets on 16 July, I shall consider the matter against that background. I am doing nothing worse than what has happened in England. A holdback has already been announced for England, but I have not announced a holdback for Wales. I have merely said that I shall consider whether holdback is required when I have received revised budgets. I shall take into account the relative performance of the Welsh authorities compared with that of the English authorities. The matter remains to be decided.

Mr. Kaufman: I am grateful to the right hon. Gentleman. He is right to say that on Welsh matters I am nowhere near as well informed as my right hon. Friend the Member for Rhondda, who will deal with them when it is appropriate to do so. However, differential mid-year holdback was opposed by the Opposition, by some Conservative Members and by local authority associations. It was taken out of the Bill because it was considered to be a penal procedure on local authorities, which cannot raise supplementary rates, to have money taken away from them in mid-year when their budgets have been made and their rates have been set. The right hon. Gentleman is doing precisely what we opposed and what we said should not happen. Local authorities will have made their budgets on the basis of the rates that they have set. The right hon. Gentleman is now threatening to take grant away from them, which would place them in serious difficulty.
My right hon. Friend the Member for Rhondda tabled a question, which was answered on Monday by the Under-Secretary of State. My right hon. Friend asked how differential holdback was to operate and how Ministers would be empowered to exercise selective holdback on rate support grant for Welsh local authorities for the current year. The Minister replied:
Subject to Royal Assent, clause 4 of the Local Government Finance (No. 2) Bill (print No. 130) which amends Section 59


of the Local Government, Planning and Land Act 1980, as amended in another place, will provide the necessary powers."—[Official Report, 5 July 1982; Vol. 27, c. 33.]
How will this be done? What provisions of the Bill, as amended in another place, will enable the Secretary of State for Wales, if this is what he decides to do, to impose a differential mid-year holdback? Will he do it by means of the planted exemption, or is there another mechanism in the Bill which will enable him to do it? If he is to do it by means of the planted exemption, our fears about the planted exemption are vindicated. If he does not do it by that means, we want to know how he will do it. I hope that the Minister will give us a precise reply. It is essential that he does.
Will the Minister assure the House that there will be no mid-year holdback in England this year? Will he give us that assurance following the Secretary of State's statement to the consultative council on 19 May?
Will the Minister repudiate the report, published this week, that clawback is instead to be used as a discriminatory penalty? The right hon. Gentleman will remember that we discussed the issue in Committee and that he, in his kindly way, told me that I did not understand the difference between clawback and holdback. I told him that we were worried about the use of differential clawback as a means of penalising local authorities. We want a categorical assurance that clawback used differentially will not be employed as a penalty in this financial year.
Finally, I ask the Minister to repudiate reports that the Secretary of State for the Environment, having resisted Treasury demands that there should be an overall mid-year holdback this year, will introduce a massive cut in the rate support grant next year. Reports suggest that there will be a back-door penalty if there is not a front-door penalty this year.
The Government's handling of these matters has been marked by incompetence that is remarkable even by the standards of the present incumbents at the Department of the Environment, one of whom is a temporary, visiting incumbent as far as we can gather from his attendances when we have been considering the Bill. The clause is bad. The amendments make it worse. We shall oppose them.

Mr. Charles Morrison: The last point in the lengthy speech of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) might be the most important of those that he made. I took part in the Second Reading debate, but I have taken no further part in the proceedings until now. I thank my lucky stars that I was not required to take part in the Committee proceedings.
I do not wish to criticise or to be rude to the right hon. Member for Ardwick, but, because of the way in which we have developed a jargon for local authority finance, and because of the immensely complicated way in which the system has developed, no one but a genius can have a clue about what is meant by what is said at any one time. I am not suggesting that there is an easy way round that fearsome problem, but I doubt whether many hon. Members understand how the system works or have been enlightened by what the right hon. Gentleman has just said. If we do not understand, it is not surprising that most of our constituents do not understand.
Clause 4 was subjected to strong criticism on Second Reading, particularly because of the power to be allocated

to the Secretary of State but also because of the uncertainty that it would create for local authorities when budgeting. The powers proposed, which would have allowed variation in the distribution of the block grant during the year, could have made local authority budgeting at best inspired guesswork and at worst a farce. That is apart from undermining the discretion and power of local government—a matter about which I complain consistently.
Not surprisingly, given the content of clause 4, local government reaction was strong. Representations were made. I am glad that my right hon. Friend the Secretary of State listened carefully, took sensible account of what was said and agreed to amendments in Committee. Without doubt, requiring the Secretary of State to specify at the main order stage in November the principles that he would apply to all authorities when assessing the operation of any differential grant went some way towards recreating certainty about holdback. That was excellent, although it did not reduce the overall dislike of the Bill, and local government was grateful.
The Government had still further thoughts and, in another place, they introduced Lords amendment No. 10, which was accepted. The Minister in another place said that the position was still not understood. There is nothing surprising about that. Either because it is not understood, or because for some the Bill has a different meaning from that in the Government's mind, great anxiety continues.
I accept that amendment No. 10 is meant to be helpful. In the context of the clause there is little wrong with giving the Secretary of State power to consider representations from local authority associations or individual local authorities to the effect that certain categories of expenditure might be disregarded when considering the operation of grant holdback. There is something to be said for that power, but amendment No. 10 reintroduces budgeting uncertainty in respect of grant totals for individual local authorities. It will enable decisions on the level of grant holdback to be taken not only at main order stage, but, through the mechanics of supplemetary orders, at other times in the financial year.
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That is the background to my amendment. If my right hon. Friend accepts it, not only will the Secretary of State be required to announce such categories of expenditure as will be disregarded for holdback purposes at the main order stage, but for the second time a major uncertainty will be removed from local authority budgeting—an uncertainty which could make local authority budgets meaningless.
I have noted the comments in another place by the Under-Secretary of State. He said that the amendment could be used only to reduce the incidence of holdback, not to increase it. That is what he thinks, and I suspect that that is what my right hon. Friend the Minister thinks, but some local authority associations believe that the power goes much further than my right hon. Friend assumes. My hon. Friend the Member for Hornchurch (Mr. Squire) wishes to be associated with that view. Even at this late stage, I hope that my right hon. Friend will be prepared to accept my sensible amendment.

Mr. John McWilliam: The House cannot be pleased at the absence of the Secretary of State from a debate on the most important part of the Bill. Clause 4 causes most consternation among local authorities. It


causes the most dismay when they look to the future. Given the tenor of the amendments, particularly amendment No. 10, I regret that the Secretary of State is not in the Chamber to answer the pertinent questions posed by my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman).
We are extremely worried about the amendments. In Committee we were given a categoric assurance that there would be no mid-year holdback or clawback. We were assured that the provision dealt with all local authorities, not specific authorities. Amendment No. 10 allows the Government to grant exemption from holdback to local authorities of which they approve.
That has two effects. It means, first, that the sums will be held back selectively—there will be a clawback. Secondly, the burden of the balance will have to be shared among everyone else. There is a cash limit. It is a difficult problem.
If the Government were to honour the categoric assurance that they gave in Committee, they would not support amendment No. 10, but I do not expect them to do that. I have learnt in my short time as a Member of Parliament that the Government will do whatever they believe is convenient. I have no confidence in any of the assurances that they have given.
I hope that when the Under-Secretary replies to the debate he will be able to give my right hon. Friend the Member for Ardwick a categoric assurance that the Government will not operate amendment No. 10 in the way that my right hon. Friend suggested. The only honourable way to proceed is not to move amendment No. 10, but to drop it. If it is left on the statute book the assurances that the Government have given in all good faith could be used differently by others in the future. I do not impugn the Government's honour, but their assurances are not worth the paper on which they are written as long as anything like amendment No. 10 is on the statute book.
It is especially galling to listen to the Government talking about the way in which they intend to operate holdback and clawback. I am glad that the Under-Secretary of State for Education and Science is present. Blaydon is part of the Gateshead metropolitan borough, which has overspent by £1 million, according to the Government's calculation, on its education budget. It has overspent by 10 per cent. on the GREA. It should be remembered that education represents about 60 per cent. of the GREA.
The council is castigated by Her Majesty's chief inspector for the cuts that it has had to make in the education service, but that does not ring true. Either the Government want a decent service, or they do not. The use of two Departments, one to castigate the local authority because it is not spending enough on education, although it has overspent to the GREAs, the other to castigate the authority because it is underspending on the GREAs, seems daft.
I hope that the Minister will seriously consider the commitments that he gave to the Committee and whether the terms of amendment No. 10 are compatible with the assurance that there would be no differential holdback. The facility for that type of exercise will exist if the amendment is carried, even though it may be done under a different name.
I am not suggesting that the Minister will be dishonourable about a commitment that he has given, but he speaks only for himself. He cannot speak for the

Secretary of State, because he is not here. He cannot speak for the Under-Secretary of State, because he is not here either. He can speak only for himself. I hope that the House will give the reply—I know that the hon. Gentleman who will reply is an honourable Gentleman—the weight that it is worth. It will be his commitment. We will accept it as being honourably given, but we cannot accept that it could not be misused by future Ministers in the hon. Gentleman's Department.

Mr. Marks: The hon. Member for Devizes (Mr. Morrison) spoke of the utter confusion arising from the complications of the system of RSG and the jargon associated with it. It is not long since the Secretary of State said that the main reason for changing the system was to simplify it. I can only assume that the Heseltinian version of simplicity is about as accurate as the right hon. Gentleman's definition of clarification.
Hon. Members were informed last week of the installation of a new paper shredding machine on the ground floor. We can only assume that the old one was chucked out with the Local Government Finance (No. 1) Bill and the several drafts of the Local Government Finance (No. 2) Bill. I hope that the new Bill, especially clause 4, will be fed into the new machine.
The amendments that the Government say will improve the Bill relate to its worst part—clause 4. It makes legal the penalties that were illegally imposed on the local authorities by the Secretary of State. Many of the cuts that have been imposed because of the threat of the present Bill and the cuts in the rate support grant have made for inefficiency. They have lowered standards. Local government redundancies have added considerably to youth unemployment. It is all very well to talk of natural wastage, but in the end those who suffer are the youngsters who would normally have filled those jobs.
The transfer of work from local authorities to private firms has not helped. There has been a large reduction in the number of apprenticeships both in local government and within the Department. Education absorbs most of local government spending. Cuts and uncertainties because of the Bill have led to much confusion and are leading to further confusion in education.
We were assured by the right hon. and learned Member for Runcorn (Mr. Carlisle), when he was Secretary of State, that the cuts would not lead to a reduction in educational standards. We hear little of that now. The Under-Secretary of State for Education and Science popped into the Chamber a few moments ago. I hope that he will return to listen to what I have to say about education.
Her Majesty's inspectors have already warned some authorities of the dangers of the cuts. Somerset is one of four local authorities about which the inspectors have made adverse comments on the quality of education.

Mr. King: The inspectors have not made adverse comments about the quality of education. It is important to put that on the record. They raised questions about resources and the possible ramifications. The hon. Gentleman will know that the quality of education and examination results in Somerset are extremely high. I hope that he will understand my reason for intervening. I know a little about the county.

Mr. Marks: Somerset is one of four authorities in which we are given to understand by Her Majesty's


inspectors—not the inspectors of the Department of Education and Science or those of the Department of the Environment—education resources are unsatisfactory.

Mr. Christopher Price: I, too, know a little about this, although clearly not as much as the Minister. The inspectors were referring both to standards of provision, which accounted for about 50 per cent. of the criteria included in their assessment, and to their professional judgment about education standards which are separate from standards of provision. The Minister was therefore wrong in his intervention. Her Majesty's inspectors gave evidence that those two elements were involved. Standards of provision were part of it and counties that had reduced standards of provision two years in succession tended to be at the bottom of the third division, but the inspectors also made judgments about the quality of education quite separately from the standards of provision.

Mr. Marks: I am grateful to my hon. Friend. The reasons for the problems in education are the cuts and the uncertainty that has arisen. It is beyond question that Her Majesty's inspectors are not satisfied with certain local education authorities. Yet the Department of the Environment is simultaneously telling Somerset that it is spending too much. What will happen if the Department of Education and Science eventually tells that authority that it is not carrying out its statutory requirements and the Department of the Environment continues to maintain that it is spending too much?
The Guardian yesterday quoted a letter to parents from the head of Tiffin grammar school in Kingston, which still suffers under the system of segregated secondary education, as follows:
Expenditure by parents (on textbooks) is essential to the maintenance of our standards of GCE A-level work in the sixth form.
That may be all right for some parents in Kingston, but not for all of them. What happens if a pupil's father is one of the 3 million or more unemployed or one of the 1 million who have been out of work for more than a year? Supplementary benefit does not include textbook allowances for children. The worst possible financial position is to be unemployed when one's children reach the sixth form.
If the Under-Secretary of State for Education and Science had remained in the Chamber, he would probably have said that the pupil-teacher ratio is better than ever. There are two explanations for that. Either he does not know what the ratio is, or, if he does, he will not tell us. Last week, I asked the Secretary of State for Education and Science what was the pupil-teacher ratio for each education authority in January 1982. He said that he could not give the information before the autumn. Anyone who has worked in schools knows that the return on pupils and teachers is ready by the end of January, and that by the end of February the local authority has sent its return to the Department. Yet the Department cannot produce the figures, although the Minister claims that they have improved.
Ministers at the Department of the Environment must realise that with falling school rolls maintenance of the pupil-teacher ratio is not enough and that children are

suffering. I note that the Secretary of State—the so-called Minister for Merseyside—has told Liverpool to forget any worries about spending too much and to see that schools in Toxteth are brought up to standard. Education is just one example in which false economies are proving costly.
Any motorist and most pedestrians will testify to the state of the roads. Only this week I heard from an old lady who was on her way to hospital in Manchester when she tripped in a pothole in the road and broke her leg. Under an earlier Conservative Administration, we had a ruling that a local authority is not liable to pay compensation for injury as a result of a fall on the pavement unless there is a difference of at least an inch between the levels of the paving stones. It seems that we now need a ruling about the depth of potholes.
The people hardest hit by the cuts are those most in need. Considerable investment is needed in education and in social services to help the sick. People are now discharged from hospital at a much earlier stage of convalescence, but, because of the threat of the clause—the amendment, I believe, will make the position worse—the services available to them when they come out of hospital will be cut still further.
This is an attack on local government. What kind of candidates will come forward for council elections if the Government continue this attack? They will be those who carry on in the hope that some day they may become chairman of the council or mayor, not those who are enthusiastic about local government and have something to offer.
When the Minister introduced the amendments, he said that they were merely drafting improvements to deal with the way in which holdback will work and to achieve a reduction in expenditure. They are nothing of the kind. They are a serious attack on local government. They are nonsense and should be rejected.

Mr. Cowans: I shall try not to detain the House for too long, but two points must be made in this connection. The House is entitled to an explanation from the Minister on two aspects of clause 4 which greatly concerned Members on both sides of the Standing Committee. Under great pressure from the Opposition and, I readily accept, with the help of Conservative Members, some alterations were made.
The Committee was concerned that under the clause as drafted any Secretary of State, Labour or Tory, had a dictatorial option to isolate an individual local authority. Another nonsense in clause 4 that exercised the Committee's mind was the fact that at any time during the financial year the Secretary of State could step in and change the rules after all the authorities had drawn up their budgets.
The Secretary of State got together with my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) and was persuaded of the error of his ways. Having seen the error, he took the provision out of the Bill. It was a bad Bill from the outset, but it became slightly better as a result of that. One can only assume that between the end of the Committee stage and the arrival of the Lords amendments the Minister had a brainstorm. What is the logic behind taking something out and then having it put back by the other place? Even in a lunatic asylum that would require some explanation.
The explanation can only be either the Minister was wrong to take it out in the first place—in which case, why


did he not say so at the time?—or that somebody outside who was not in the Committee has wheedled his way in and sneaked up behind the Minister and told him that he must put it back. The Minister did not come to members of the Committee and tell us honestly that he had considered the matter again and that although he had agreed to take it out then, he intended to put it back. It is nonsense to give and implement assurances and then reverse them in another place. By doing that the Minister has confused not only the Opposition but his own party, and nowhere was that made clearer than in the speech of the hon. Member for Devizes (Mr. Morrison).
More importantly, the Minister has successfully confused every local authority association in the country. He has the unique distinction, which should go into the "Guinness Book of Records", of being the only person to my knowledge—and I have spent some time in local government—to have united every local authority association, whether Tory or Labour controlled, against him. That takes some doing. They are completely confused. They were divided when the Bill went into Committee. We are now back to square one and a two-minute explanation from the Minister is not good enough. We need a detailed explanation of why he changed his mind or why somebody else changed it for him.
The hon. Member for Devizes made a laudable attempt to rectify something that the Minister had done. There is only one way in which he can have his wish. The Bill must be returned to its original form. If that is the Minister's desire, I hope that he will join the Opposition in the Lobby tonight.

Mr. Cartwright: I, too, shall concentrate on amendment No. 10. It is the most objectionable of the batch. I strongly agree with the hon. Member for Devizes (Mr. Morrison) that it adds to the uncertainty for local authorities. Uncertainty is the main obstacle to local authorities budgeting tightly and sensibly.
As Opposition hon. Members have pointed out, the major concern of local authorities when they first saw the Bill was that a differential holdback would be sprung on them part way through the financial year. They are worried that they will be caught in a nutcracker, lose grant half way through the year and be unable to make good the losses with a supplementary rate. They would be completely at the Secretary of State's mercy.
To be fair to the Minister, in our discussions in Committee it seemed that he understood that concern. When the Bill left the House, efforts had been made to safeguard the position. It had been made clear that the principles on which differential holdback would be applied would be made clear and evident at the main order stage in November. Local authorities would at least know the risk they were running and could levy a suitable rate at the start of the financial year. As the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) said, that was an improvement on a not very good situation.
What must have come across to the Minister, in the odd moments during which he listened to the debate, is the substantial worry that that position is being undermined by amendment No. 10. That worry cannot be put down to the nasty suspicious mind of my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman). It has been expressed in representations by the Association of Metropolitan Authorities and the Association of County

Councils. There is a general fear that if this power is given to the Secretary of State it will be used to introduce a system of mid-year holdback.
Where cash is limited, exemptions granted to favoured authorities could lead to larger penalties on unfavoured authorities. As my right hon. Friend the Member for Ardwick suggested, it would be possible to apply a super-holdback and then exempt the favoured authorities from that holdback.
It is clear that the worry about the undermining must be removed tonight. The safest way to do that is to vote against the amendment. If we do not, it is for the Minister to persuade us that he is the honourable man with whom we discussed this issue in Committee and assure us that these powers will not be used to undermine the assurances given in Committee.
In any case, I object to the proposals in amendment No. 10. It gives the Secretary of State considerable personal powers to exempt expenditure of any description or amount in deciding whether an authority has or has not complied with its target and the guidance of the Secretary of State. It is another piece of enabling legislation for the Secretary of State. We have seen much of that in the past few years.
7.45 pm
Secretaries of State should not have the power to dish out rewards and penalties to local authorities, unless we are absolutely clear about the criteria that will be used in dishing out the goodies and the bad things. A new criterion was bounced into our debate by the Minister. He said that one of the criteria will be a judgment based on spending per head of the population. That has not appeared anywhere else in our discussions—Interruption— I am sure that if we refer to Hansard we shall see that the Minister referred to spending per capita by one authority compared with another. He seemed to imply that where spending per capita was lower the authority might benefit from the Secretary of State's judgment, but where the spending was higher the authority could be penalised. That is a new criterion to be used by the Secretary of State in making his judgments.
There is a natural suspicion that one of the criteria will be political affinity, with an old pals' protection system which will safeguard political allies and penalise political enemies. I do not suggest that the present Secretary of State would fall victim to that temptation, but Secretaries of State should not have that temptation placed in front of them. We must reject amendment No. 10.

Mr. R. B. Cant: I shall look at this saga from the point of view of one of the few remaining practising local councillors in the House.
The general consensus, whether one is referring to Tories, Labour or alliance, and even from officials, is that the Bill and the original Local Government, Planning and Land Act give the impression of massive incompetence by civil servants. I shall not include politicians in that criticism, or the Minister, because he is much too gracious a man to be indicted in that way. I include the lawyers and statisticians who worked on what used to be called multiple regression analysis, and so on.
I have been in local government for 30 years and I have never known a period in which the most senior officials in local government have been so continuously bewildered and perplexed by what the Government are doing and by their changes of mind. The changes in the Bill are serious


I hope that the Minister will say something about the retrospective validation of targets, guidelines and penalties, as well as the new dimension of policy by representation.
I also support my right hon. Friend in asking for clarification of the report in the Financial Times on the battle between the Secretary of State for the Environment and the Chief Secretary to the Treasury. The Secretary of State for the Environment is reported to have said that the Chief Secretary to the Treasury's new idea is
nothing more than a trick to dress up the unacceptable 'differential holdback' as 'differential close-ending.'
It is not enough to develop these legalities and various topical methods of working out the rate support grant, and so on. If the Minister wants to control spending—I speak as chairman of a fairly big education committee—he must, above all, see how the machine operates. He must find out whether the time scale of what he is expecting from local authorities is adequate. He must be prepared to look at what local education authorities face when cutting education expenditure, at the great problems of closing schools—one of the main cuts—and at how difficult and obstructive the Department of Education and Science can be in getting a school closed. He must bear in mind that we are fed with leaks of one sort or another and we have to make cuts in the number of polytechnic staff in 1983–84. That is still a leak, yet at least 12 months' notice must be given before one can get rid of a polytechnic lecturer.
There is also the financial burden placed on local education authorities by the teacher training colleges that no-one seems to want, but the Department of Education and Science will not say whether they should be closed. We were originally to be told a year ago. The decision was then put back to last December. We were then told that it would be Easter this year. Now we are told that it will be some time in the autumn.
Local authorities may be forced to make these cuts to keep within their grant-related expenditure assessments, yet the Department keeps dragging its feet. It is no good the Minister telling local authorities to behave themselves and to make cuts unless he is prepared to look at the logistics of the operation. If necessary, he should knock a few heads together in other Departments to get the job done.

Mr. Christopher Price: I did not intend to intervene, but the Minister made a statement that simply was not true. It is important to get the truth on the record, and, as Chairman of the Select Committee, I have a responsibility to do it.
I am glad that the Secretary of State is present, because I think he will confirm what I am about to say. Many hon. Members have alluded to the fact that the Department of the Environment is threatening to penalise local authorities which are being told by the Department's inspectors that their expenditure is so low that it is jeopardising standards of education in those authorities. The four authorities at the bottom of the senior chief inspector's third division have now been revealed as Somerset, Wiltshire, Norfolk and Gateshead.
This system originated under the Labour Government, who proposed to make cuts in education expenditure. The local authorities warned at the time that if such cuts were made, education standards would fall below those required

by the 1944 Act. As a result, an expenditure steering group, under the local authority consultative committee, was set up to test whether the money available would jeopardise education standards.
For a number of years, the inspectors produced reports that were not made public. I commend the Government for making those reports public in the last two years. If it were simply a report on the amount spent on education in each local authority area, we would not need HMIs to produce such a report. The Chartered Institute of Public Finance and Accountancy could produce those figures easily.
The point about this report and the rank order in which local authorities are put is that it is the judgment of professionally qualified inspectors on provision and on the standards of education. The inspectors were concerned about education standards in the four authorities that I have mentioned because provision had been reduced to such an extent.
Ministers are now arguing, "But the inspectors are not doing it right." The right hon. Gentleman is presuming that he is a better inspector of education standards than the people appointed by the Secretary of State. It is true that there is some connection between education standards, which were meant to be guaranteed by section 8 of the 1944 Act, and the amount spent on education. The only people who can report on the state of the nation's education are the HMIs, and the Minister does the education service no good at all by saying that he knows better than the senior chief inspector that Somerset is all right and that there is nothing to worry about.
It is important to put that on the record, because if we have ministerial statements of that sort, there is no point going through the ESG(E) cycle each year to determine the quality and standard of education.
All hon. Members believe that we should have good standards of education. Ministers have put those standards in jeopardy in the last two years, not just by cutting the money available, but by presuming that, although Somerset cut the money two years in succession, they know best and that there is nothing wrong with Somerset education. The Minister does no service to the House by adopting such an attitude.

Mr. King: The speech of the hon. Member for Lewisham, West (Mr. Price) diverted us slightly from the main debate. The hon. Gentleman chose to misquote me. He knows perfectly well that I took exception to what the hon. Member for Manchester, Gorton (Mr. Marks) said about poor education in Somerset. I know something about the HMI report on Somerset. The hon. Gentleman was making an argument about the resources applied to education in 1981, but he did not take into account certain changes that have recently been made in the county education budget, particularly with regard to in-service training of teachers and other aspects. That was a misleading comment, and I wish to correct it. Somerset has a fine record of achievement in its examination performance, which is one criterion the use of which I hope the hon. Member for Lewisham, West does not entirely disparage.
The right hon. Member for Manchester, Ardwick (Mr. Kaufman) said that we do not seem to live in the same world. I hope that he will not think it offensive if I say that I have thought that for some time and that such a view does not entirely disgrace me. The amendments are essentially technical and clarify certain aspects of the operation of


block grant and the multipliers, but I well understand why the right hon. Gentleman made rather more of them than they perhaps deserve.
I accept that Lords amendment No. 10 has given rise to concern among a number of hon. Members, including my hon. Friend the Member for Devizes (Mr. Morrison) and my hon. Friend the Member for Hornchurch (Mr. Squire) who, while unable to be present, has made representations to me.
The right hon. Member for Ardwick will know that I am sensitive to the honouring of undertakings that I give. He referred perfectly fairly to my original statement in Committee on the Local Government, Planning and Land Bill 1980 that we did not intend GREAs to be used as targets. That was in response to strong representations from local authorities at the time that we should not do so. The change of mind was not a unilateral decision of the Government, but was in response to strong representations from local authorities and local authority associations that we should use GREAs as an alternative target. The Government felt that it was reasonable to accede to that request.
I deal now with the political nightmare that was paraded before the House about this being a selective and partisan system for determining grant distribution and penalty. I intervened earlier on that matter, and the hon. Member for Woolwich, East (Mr. Cartwright) also raised the issue. I wished, not to establish a new criterion, but simply to draw attention to the fact that there were other ways in which the matter could be examined. Expenditure per head is not a criterion that one can apply, because it will vary widely. For example, expenditure per head on education will depend very much on the proportion of children for which a local authority is responsible.
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The GREA tries to establish an absolute level or yardstick by which comparisons can be made. As the right hon. Member for Ardwick said, people are suffering not on political grounds, but because of expenditure by some local authorities which is way above that of others. We have departed from the old and offensive system which meant that the more an authority spent, the more grant it received at the expense of more prudent and economic authorities. That is the political nightmare which I hope is now well behind us.
The right hon. Member for Ardwick made another accusation—that I had wilfully misled the Committee by pretending that an undertaking that I had given applied to Wales. Very fairly, the right hon. Gentleman read out the undertaking that I gave. Having read it out, it is incredible that he should then try to maintain his argument. I remind the Committee what I said:
I can, therefore, give a specific assurance to the Committee that we do not intend to operate a differential holdback scheme in England of any greater severity than that already announced on 21 December."—[Official Report, Standing Committee D, 2 February 1982; c. 73.]
I did not merely rely on a few words muttered unobtrusively in Committee. I immediately made available to every member of that Committee a copy of that statement so that each Member could study it. I am not entirely familiar with every aspect of the way in which the scheme operates in Wales. We must put our heads together on that. One feature of the block grant is that the

Welsh grant, as the right hon. Member for Rhondda (Mr. Jones) said, is now operated separately from the English grant.
I have no authority to speak about Wales. I simply made a statement in relation to England. I referred to the scheme not being of
any greater severity than that already announced on 21 December.
My right hon. Friend did not announce anything on that date and there was no holdback in Wales. The position is entirely different. I hope that he will not accuse me of misleading the Committee—I put it no stronger than that—because to do so would be monstrously unfair.
The right hon. Gentleman asked a fair question: if my right hon. Friend the Secretary of State is to operate a different scheme in Wales, how will he do it? From the Bill, the right hon. Gentleman will see that the powers that my right hon. Friend will use are contained in section 59(6)(a) of the Local Government, Planning and Land Act 1980. Subsection (7) of clause 4 of this Bill prevents that from being done in anything other than the main report. But that provision cannot come in until next year. What the right hon. Gentleman sought to establish, and the purpose of my assurance, is to say that that power, which will hereafter be prohibited, will technically be available to us this year. That is why gave the specific assurance for England. That is why the power will remain available if my right hon. Friend decides to use it.
My hon. Friend the Member for Devizes and the hon. Member for Woolwich, East mentioned amendment No. 10 and the exemption powers. Exemption from holdback is important. The right hon. Member for Ardwick said, fairly, that emergency expenditure should be exempted. He referred to riots, and he will know the importance that inner city authorities attach to their urban programme expenditure. The exemption power must be included, because we are not satisfied that the previous arrangements provided adequate power to cover the exemptions.
The amendment of my hon. Friend the Member for Devizes provides that the power to give exemptions should be confined to the main report and not apply to supplementary reports. The difficulty is that in the first two years the exemption provisions that have already been announced have to be implemented in supplementary reports. The effect of my hon. Friend's amendment will be to disbar urban programme riot and emergency expenditure from those exemptions. No one wishes to see that happen.
I well understand that the provision has caused anxiety, and we have tried to ensure that the exemption is fairly circumscribed. An exemption can be granted only to diminish the holdback, not to increase it. It can be made only on representations from local authorities and in accordance with general principles applicable to all authorities. However, the right hon. Member for Ardwick said that there might be an across-the-board holdback and that the exemption could be used to introduce a differential selective discrimination against individual authorities. That is ingenious, but it is not the purpose of the amendment. I assure the right hon. Gentleman that we do not intend to use the new amendment to introduce super-holdback by the back door.
The right hon. Gentleman asked for an assurance about a mid-year holdback or a differential clawback this year. He may be referring to press speculation, but he must understand that I cannot comment on that. I cannot assure


him about those matters. He is right to say that it would be possible under the present legislation, but whether it will be required is another matter. I can go no further now, except to say that I understand his point that local authorities should know about it as early as possible.
The right hon. Gentleman also asked me for a categorical assurance that there would be no cut in the grant percentage for 1983–84. Those matters are being discussed and I cannot give him any assurance now. However, I agree with him that it is important to give local authorities information about the grant arrangements for the coming year as soon as possible. The hon. Member for Stoke on Trent, Central (Mr. Cant) made that clear. I understand the Government's duty to give the earliest possible guidance to local authorities. We hope that we can do so much earlier than it has been done for some time.
I hope that those comments clarify certain queries that have been raised are helpful and that the House will agree with the Lords amendment.

Question put and agreed to.

Lords amendment Nos. 9 and 11 agreed to.

Lords amendment proposed: No. 10, in page 3, line 44, at end insert—
( ) If representations in that behalf are made to him by any association of local authorities or by any local authority the Secretary of State may—

(a) in the Rate Support Grant Report made for any year under section 60 of the said Act of 1980; or
(b) in a supplementary report made for any year under section 61 of that Act,

provide that expenditure of any description or amount shall be disregarded for the purposes of paragraph (cc) of subsection (6) of the said section 59 and in determining under subsection (3)(c) above whether or the extent to which local authorities have or have not complied (or have or have not taken steps to comply) with the guidance referred to in that paragraph.".—Mr. Brooke.

Question put, That this House doth agree with the Lords in the said amendment:—

The House divided: Ayes 282, Noes 215.

Division No. 261]
[8.10 pm


AYES


Aitken, Jonathan
Brittan, Rt. Hon. Leon


Alexander, Richard
Brotherton, Michael


Alison, Rt Hon Michael
Brown, Michael (Brigg &amp; Sc'n)


Amery, Rt Hon Julian
Browne, John (Winchester)


Ancram, Michael
Bryan, Sir Paul


Arnold, Tom
Buchanan-Smith, Rt. Hon. A.


Aspinwall, Jack
Buck, Antony


Atkins, Rt Hon H. (S'thorne)
Budgen, Nick


Atkins, Robert (Preston N)
Bulmer, Esmond


Baker, Kenneth (St.M'bone)
Burden, Sir Frederick


Baker, Nicholas (N Dorset)
Butcher, John


Banks, Robert
Cadbury, Jocelyn


Benyon, Thomas (A'don)
Carlisle, John (Luton West)


Benyon, W. (Buckingham)
Carlisle, Kenneth (Lincoln)


Berry, Hon Anthony
Carlisle, Rt Hon M. (R'c'n)


Best, Keith
Chalker, Mrs. Lynda


Bevan, David Gilroy
Chapman, Sydney


Biffen, Rt Hon John
Churchill, W. S.


Biggs-Davison, Sir John
Clark, Hon A. (Plym'th, S'n)


Blackburn, John
Clark, Sir W. (Croydon S)


Blaker, Peter
Clarke, Kenneth (Rushcliffe)


Body, Richard
Cockeram, Eric


Bonsor, Sir Nicholas
Colvin, Michael


Boscawen, Hon Robert
Cope, John


Bottomley, Peter (W'wich W)
Cormack, Patrick


Bowden, Andrew
Corrie, John


Boyson, Dr Rhodes
Costain, Sir Albert


Braine, Sir Bernard
Cranborne, Viscount


Bright, Graham
Critchley, Julian


Brinton, Tim
Crouch, David





Dickens, Geoffrey
Lang, Ian


Dorrell, Stephen
Latham, Michael


Douglas-Hamilton, Lord J.
Lawrence, Ivan


Dover, Denshore
Lawson, Rt Hon Nigel


du Cann, Rt Hon Edward
Lee, John


Dunn, Robert (Dartford)
Lennox-Boyd, Hon Mark


Dykes, Hugh
Lester, Jim (Beeston)


Eden, Rt Hon Sir John
Lewis, Kenneth (Rutland)


Edwards, Rt Hon N. (P'broke)
Lloyd, Ian (Havant &amp; W'loo)


Eggar, Tim
Lloyd, Peter (Fareham)


Elliott, Sir William
Loveridge, John


Emery, Sir Peter
Luce, Richard


Eyre, Reginald
Lyell, Nicholas


Faith, Mrs Sheila
Macfarlane, Neil


Farr, John
MacGregor, John


Fell, Sir Anthony
MacKay, John (Argyll)


Fenner, Mrs Peggy
Macmillan, Rt Hon M.


Finsberg, Geoffrey
McNair-Wilson, M. (N'bury)


Fisher, Sir Nigel
McNair-Wilson, P. (New F'st)


Fletcher, A. (Ed'nb'gh N)
Madel, David


Fletcher-Cooke, Sir Charles
Major, John


Fookes, Miss Janet
Marlow, Antony


Forman, Nigel
Marten, Rt Hon Neil


Fowler, Rt Hon Norman
Mather, Carol


Fraser, Peter (South Angus)
Maude, Rt Hon Sir Angus


Fry, Peter
Mawby, Ray


Gardiner, George (Reigate)
Mawhinney, Dr Brian


Gardner, Edward (S Fylde)
Maxwell-Hyslop, Robin


Glyn, Dr Alan
Mayhew, Patrick


Goodhart, Sir Philip
Meyer, Sir Anthony


Goodhew, Sir Victor
Miller, Hal (B'grove)


Goodlad, Alastair
Mills, Iain (Meriden)


Gorst, John
Miscampbell, Norman


Gow, Ian
Mitchell, David (Basingstoke)


Grant, Anthony (Harrow C)
Moate, Roger


Gray, Hamish
Monro, Sir Hector


Greenway, Harry
Montgomery, Fergus


Griffiths, Peter Portsm'th N)
Moore, John


Grist, Ian
Morgan, Geraint


Grylls, Michael
Morris, M. (N'hampton S)


Gummer, John Selwyn
Morrison, Hon C. (Devizes)


Hamilton, Hon A.
Morrison, Hon P. (Chester)


Hamilton, Michael (Salisbury)
Mudd, David


Hampson, Dr Keith
Murphy, Christopher


Hannam, John
Myles, David


Haselhurst, Alan
Neale, Gerrard


Hastings, Stephen
Needham, Richard


Havers, Rt Hon Sir Michael
Nelson, Anthony


Hawkins, Sir Paul
Neubert, Michael


Hawksley, Warren
Newton, Tony


Hayhoe, Barney
Nott, Rt Hon John


Heath, Rt Hon Edward
Onslow, Cranley


Heddle, John
Oppenheim, Rt Hon Mrs S.


Henderson, Barry
Osborn, John


Heseltine, Rt Hon Michael
Page, John (Harrow, West)


Hicks, Robert
Page, Richard (SW Herts)


Higgins, Rt Hon Terence L
Parkinson, Rt Hon Cecil


Hogg, Hon Douglas (Gr'th'm)
Parris, Matthew


Holland, Philip (Carlton)
Patten, John (Oxford)


Hooson, Tom
Pawsey, James


Hordern, Peter
Percival, Sir Ian


Howell, Rt Hon D. (G'ldf'd)
Pink, R. Bonner


Howell, Ralph (N Norfolk)
Pollock, Alexander


Hunt, David (Wirral)
Porter, Barry


Hunt, John (Ravensbourne)
Prentice, Rt Hon Reg


Hurd, Rt Hon Douglas
Price, Sir David (Eastleigh)


Irvine, Bryant Godman
Proctor, K. Harvey


Irving, Charles (Cheltenham)
Raison, Rt Hon Timothy


Jenkin, Rt Hon Patrick
Rathbone, Tim


Jessel, Toby
Rees-Davies, W. R.


Johnson Smith, Sir Geoffrey
Renton, Tim


Jopling, Rt Hon Michael
Rhodes James, Robert


Joseph, Rt Hon Sir Keith
Ridley, Hon Nicholas


Kershaw, Sir Anthony
Ridsdale, Sir Julian


Kilfedder, James A.
Rifkind, Malcolm


Kimball, Sir Marcus
Roberts, M. (Cardiff NW)


King, Rt Hon Tom
Roberts, Wyn (Conway)


Knight, Mrs Jill
Rossi, Hugh


Knox, David
Rost, Peter


Lamont, Norman
Royle, Sir Anthony






Sainsbury, Hon Timothy
Townend, John (Bridlington)


St. John-Stevas, Rt Hon N.
Trippier, David


Shaw, Giles (Pudsey)
Trotter, Neville


Shaw, Sir Michael (Scarb')
van Straubenzee, Sir W.


Shepherd, Colin (Hereford)
Vaughan, Dr Gerard


Shepherd, Richard
Viggers, Peter


Shersby, Michael
Waddington, David


Silvester, Fred
Wakeham, John


Sims, Roger
Waldegrave, Hon William


Smith, Dudley
Walker, Rt Hon P. (W'cester)


Smith, Tim (Beaconsfield)
Walker, B. (Perth)


Speed, Keith
Waller, Gary


Spence, John
Walters, Dennis


Spicer, Michael (S Worcs)
Ward, John


Sproat, Iain
Warren, Kenneth


Squire, Robin
Watson, John


Stainton, Keith
Wells, Bowen


Stanbrook, Ivor
Wells, John (Maidstone)


Stanley, John
Wheeler, John


Steen, Anthony
Whitelaw, Rt Hon William


Stevens, Martin
Whitney, Raymond


Stewart, A. (E Renfrewshire)
Wickenden, Keith


Stewart, Ian (Hitchin)
Wiggin, Jerry


Stokes, John
Wilkinson, John


Stradling Thomas, J.
Williams, D. (Montgomery)


Tapsell, Peter
Winterton, Nicholas


Taylor, Teddy (S'end E)
Wolfson, Mark


Tebbit, Rt Hon Norman
Young, Sir George (Acton)


Temple-Morris, Peter
Younger, Rt Hon George


Thomas, Rt Hon Peter



Thompson, Donald
Tellers for the Ayes:


Thorne, Neil (Ilford South)
Mr. Peter Brooke and


Thornton, Malcolm
Mr. Tristan Garel-Jones.


NOES


Abse, Leo
Davis, Terry (B'ham, Stechf'd)


Adams, Allen
Deakins, Eric


Alton, David
Dean, Joseph (Leeds West)


Anderson, Donald
Dewar, Donald


Archer, Rt Hon Peter
Dixon, Donald


Ashley, Rt Hon Jack
Dobson, Frank


Ashton, Joe
Dormand, Jack


Bagier, Gordon A.T.
Douglas, Dick


Barnett, Guy (Greenwich)
Dubs, Alfred


Barnett, Rt Hon Joel (H'wd)
Duffy, A. E. P.


Beith, A. J.
Dunwoody, Hon Mrs G.


Benn, Rt Hon Tony
Eastham, Ken


Bennett, Andrew (St'kp't N)
Ellis, R. (NE D'bysh're)


Bidwell, Sydney
Ellis, Tom (Wrexham)


Booth, Rt Hon Albert
English, Michael


Bottomley, Rt Hon A. (M'b'ro)
Ennals, Rt Hon David


Bray, Dr Jeremy
Evans, Ioan (Aberdare)


Brocklebank-Fowler, C.
Evans, John (Newton)


Brown, Ronald W. (H'ckn'y S)
Ewing, Harry


Buchan, Norman
Faulds, Andrew


Callaghan, Rt Hon J.
Flannery, Martin


Callaghan, Jim (Midd't'n &amp; P)
Fletcher, Ted (Darlington)


Campbell, Ian
Ford, Ben


Campbell-Savours, Dale
Forrester, John


Canavan, Dennis
Foster, Derek


Cant, R. B.
Foulkes, George


Carmichael, Neil
Fraser, J. (Lamb'th, N'w'd)


Cartwright, John
Freeson, Rt Hon Reginald


Clark, Dr David (S Shields)
Freud, Clement


Clarke, Thomas C'b'dge,
Garrett, John (Norwich S)


A'drie
Garrett, W. E. (Wallsend)


Cocks, Rt Hon M. (B'stol S)
Ginsburg, David


Coleman, Donald
Graham, Ted


Cook, Robin F.
Grimond, Rt Hon J.


Cowans, Harry
Hamilton, W. W. (C'tral Fife)


Cox, T. (W'dsw'th, Toot'g)
Hardy, Peter


Craigen, J. M. (G'gow, M'hill)
Harrison, Rt Hon Walter


Crowther, Stan
Hattersley, Rt Hon Roy


Cryer, Bob
Healey, Rt Hon Denis


Cunliffe, Lawrence
Heffer, Eric S.


Cunningham, Dr J. (W'h'n)
Hogg, N. (E Dunb't'nshire)


Dalyell, Tam
Holland, S. (L'b'th, Vauxh'll)


Davidson, Arthur
Homewood, William


Davies, Rt Hon Denzil (L'lli)
Howell, Rt Hon D.


Davis, Clinton (Hackney C)
Howells, Geraint





Hoyle, Douglas
Pendry, Tom


Huckfield, Les
Penhaligon, David


Hughes, Mark (Durham)
Powell, Raymond (Ogmore)


Hughes, Robert (Aberdeen N)
Prescott, John


Hughes, Roy (Newport)
Price, C. (Lewisham W)


Jay, Rt Hon Douglas
Race, Reg


Jenkins, Rt Hon Roy (Hillhead)
Radice, Giles



Rees, Rt Hon M (Leeds S)


John, Brynmor
Richardson, Jo


Johnson, James (Hull West)
Roberts, Allan (Bootle)


Johnson, Walter (Derby S)
Roberts, Ernest (Hackney N)


Jones, Rt Hon Alec (Rh'dda)
Roberts, Gwilym (Cannock)


Jones, Barry (East Flint)
Robertson, George


Kaufman, Rt Hon Gerald
Robinson, G. (Coventry NW)


Kerr, Russell
Rooker, J. W.


Lambie, David
Roper, John


Lamborn, Harry
Ross, Ernest (Dundee West)


Leadbitter, Ted
Rowlands, Ted


Leighton, Ronald
Ryman, John


Lestor, Miss Joan
Sever, John


Lewis, Arthur (N'ham NW)
Sheldon, Rt Hon R.


Lewis, Ron (Carlisle)
Shore, Rt Hon Peter


Litherland, Robert
Short, Mrs Renée


Lofthouse, Geoffrey
Silkin, Rt Hon J. (Deptford)


Lyon, Alexander (York)
Silkin, Rt Hon S. C. (Dulwich)


McCartney, Hugh
Silverman, Julius


McDonald, Dr Oonagh
Skinner, Dennis


McElhone, Frank
Smith, Rt Hon J. (N Lanark)


McGuire, Michael (Ince)
Spearing, Nigel


McKay, Allen (Penistone)
Spriggs, Leslie


McKelvey, William
Stallard, A. W.


MacKenzie, Rt Hon Gregor
Steel, Rt Hon David


McNally, Thomas
Stoddart, David


McNamara, Kevin
Stott, Roger


McTaggart, Robert
Strang, Gavin


McWilliam, John
Straw, Jack


Marks, Kenneth
Summerskill, Hon Dr Shirley


Marshall, D (G'gow S'ton)
Taylor, Mrs Ann (Bolton W)


Marshall, Dr Edmund (Goole)
Thomas, Dafydd (Merioneth)


Marshall, Jim (Leicester S)
Thorne, Stan (Preston South)


Maxton, John
Tinn, James


Maynard, Miss Joan
Torney, Tom


Meacher, Michael
Wainwright, E. (Dearne V)


Mellish, Rt Hon Robert
Wainwright, R. (Colne V)


Millan, Rt Hon Bruce
Walker, Rt Hon H. (D'caster)


Miller, Dr M. S. (E Kilbride)
Watkins, David


Mitchell, Austin (Grimsby)
Weetch, Ken


Mitchell, R. C. (Soton Itchen)
Welsh, Michael


Morris, Rt Hon A. (W'shawe)
White, Frank R.


Morris, Rt Hon C. (O'shaw)
White, J. (G'gow Pollok)


Morris, Rt Hon J. (Aberavon)
Whitehead, Phillip


Morton, George
Whitlock, William


Moyle, Rt Hon Roland
Wigley, Dafydd


Mulley, Rt Hon Frederick
Willey, Rt Hon Frederick


Newens, Stanley
Williams, Rt Hon A. (S'sea W)


Oakes, Rt Hon Gordon
Wilson, Rt Hon Sir H. (H'ton)


Ogden, Eric
Wilson, William (C'try SE)


O'Halloran, Michael
Winnick, David


O'Neill, Martin
Woodall, Alec


Owen, Rt Hon Dr David
Woolmer, Kenneth


Palmer, Arthur
Wright, Sheila


Park, George
Young, David (Bolton E)


Parker, John



Parry, Robert
Tellers for the Noes:


Pavitt, Laurie
Mr. James Hamilton and

Question accordingly agreed to.

Lords amendment No. 12 agreed to.

Clause 20

STUDIES FOR IMPROVING ECONOMY ETC. IN LOCAL AUTHORITY SERVICES

Lords amendment: No 18, in page 16, line 28, leave out "of local authority services" and insert
by such bodies of their services besides the studies referred to in subsection (1) above and section (Reports on impact of statutory provisions etc.) below

Mr. King: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Ernest Armstrong): With this we may take Lords amendments Nos. 19, 22 and 23.

Mr. King: The House will be aware that these amendments seek to carry out the undertakings that I gave in the House on Report, specifically to the right hon. Member for Heywood and Royton (Mr. Barnett) and my right hon. Friend the Member for Taunton (Mr. du Cann), to try to establish some, in their eyes, improved relationship between the public expenditure of public funds voted by the House, and their disbursement by Government and expenditure by local authorities.
I gave certain undertakings at that time and said that while I was anxious that the particular amendments should not be pressed by the right hon. Gentlemen, we should seek to table our amendments in the other place. The amendments have sought to reflect accurately the undertakings that I gave, and have been accepted as such. Therefore, I confine myself to saying that I recognise the significance of these amendments. It is an important step forward in terms of the accountability of Ministers to the House, something that I resent in no way, and which the Government are fully prepared to accept. The House is the proper place for Ministers to be held accountable, responsible as we are for the allocation of more than £10,000 million of public money, which forms part of the nearly £30,000 million of local authority expenditure.
That money is not a small part of the national Exechequer and the national budget and it is right that Ministers should be accountable, and through the mechanism of the Public Accounts Committee. My right hon. Friend the Member for Taunton, as a former Chairman, took a close interest in these matters. It is right to have this accountability.
My right hon. Friend, the right hon. Member for Heywood and Royton and the House will be aware that there has been a particular sensitivity on the part of local authorities about the access of the House to the accounts information of individual authorities who would claim that they are separately accountable to their electorates through their councillors and that their position would be distorted if they were also to be accountable to the House. We understand that concern, and feel that it can be met as we have sought to provide in the amendment.
We feel that this concern is not a proper reason why the accountability of Ministers to the House, and the proper wish of the House to exercise its responsibilities in checking on expenditure by the Executive, should not be monitored and approved in this way. I hope that this, which may seem to some to be rather a dull and bureaucratic amendment, may be seen by others as an important development in public accountability and the proper role of the House in public expenditure.

Mr. Joel Barnett: I should like to place on record my appreciation, as no doubt will the right hon. Member for Taunton (Mr. du Cann), of the way in which the Minister has fully met the undertakings that he gave the House.
I shall not comment in detail on the clause, because I did so when I introduced a similar new clause on Report. The clause is of value to the House of Commons, as the right hon. Gentleman said, in improving the accountability of Ministers to this House. That is absolutely vital. I know

that the right hon. Member for Taunton is of the same opinion, and that he and others have sought to improve that accountability in spending substantial funds in excess of £10,000 million which we here vote, without having any control over it.
The clause will ensure that we get better value for money. That is what we all want, although there will be political differences of opinion at all times in the House about what the expenditure should be, both in total and in individual areas. At times there is a difference of opinion, because people misunderstand the services of those who carry out the function of helping to achieve better value for money, but I hope that it will be better understood in the future.
8.30 pm
As the Minister rightly said, this is a significant step. There has never been anything like it before, and I am fully aware of its significance. At the same time, I recognise the sensitivity of the issue. One cannot speak to local authority representatives without being aware that they fear the intervention of the House, the Comptroller and Auditor General, and the Public Accounts Committee. In my view, they are wrong.
I hope that local authorities will now understand that neither I, as Chairman of the Public Accounts Committee, nor the former Chairman, nor members of the Committee, in any way seek to interfere with individual local authorities and the way in which they carry out their functions where they are directly responsible to those who elect them. Indeed, the clause specifically excludes the Comptroller and Auditor General, who will be reporting to the Public Accounts Committee and the House, from looking at individual local authorities. I wrote that into the new clause that I introduced, and it is in the clause that was introduced in another place, in an effort specifically to erase such fears from the minds of individual local authorities.
Perhaps I might make a slightly political comment. When the local authority representatives appeared before the Public Accounts Committee, they equated the Comptroller and Auditor General with the Secretary of State or with the Executive. They thought that the two were the same. That is one more reason why I want the Comptroller and Auditor General to be given full and true independence, and for that independence to be seen, as we suggested in the Public Accounts Committee report. I do not for a moment suggest that he is not wholly independent now. He is. Certainly the present incumbent of the office is very independent of the Executive. There is no question about that. So is his method of appointment, even though it is on the advice of the Prime Minister. Once he is appointed, he is wholly independent of the Executive. I hope that local authorities will understand that.
I hope that local authorities will also understand that the work of the Comptroller and Auditor General, when he gets the reports from the Commission, will not in any way be to hinder or interfere with local authorities, either as individual authorities or as a whole. His function will be, along with the Commission, to ensure better value for money. Certainly, I do not want him to be involved in the way that local authorities fear. Nor would he want to be. I cannot stress strongly enough that local authorities have nothing to fear from the clause.
The powers of the Comptroller and Auditor General remain circumscribed, so that local authorities will not


have the slightest doubt about their position. I underline a few of the words that the Minister has put in the clause and which are broadly in line with what we wanted. Subsection (1) makes it quite clear what we are talking about. The Comptroller and Auditor General will be dealing with
economy, efficiency and effectiveness in the provision of local authority services
and of other services provided by
bodies whose accounts are required to be audited in accordance with this Part of this Act
and of the financial management of such bodies.
That is what he is doing. He is helping local authorities and the House of Commons to ensure that the expenditure of more than £10,000 million of public money is more accountable to hon. Members who vote it on behalf of taxpayers. It is not Government money, but taxpayers' money, and it is right that we, as their representatives, should have an opportunity to ensure that it is spent in the best way possible. When the Comptroller and Auditor General makes his report to the House of Commons and when the Public Accounts Committee studies it, I can assure the local authorities and the local authority associations that our only concern will be as set out in the clause, to ensure that there is as much value for money and as little waste and inefficiency as possible. I hope that the measure will work well; given reasonable co-operation between the Commission and the Comptroller and Auditor General, it will work well.
Will the Minister give an assurance—I know that he will happily do so because he has done so privately—that he will give every encouragement to the Commission to co-operate fully with the Comptroller and Auditor General in the best interests of local authorities and, above all, of greater accountability to the House of Commons?

Mr. Edward du Cann: I should like to associate myself most warmly with the admirable sentiments that have just been expressed by the right hon. Member for Heywood and Royton (Mr. Barnett). I am certain that the assurances that he has clearly given to people outside who do such splendid work in local authorities will he welcomed and taken most seriously. The right hon. Gentleman speaks with great authority as the current Chairman of the Public Accounts Committee.
I have come to the Chamber from another engagement, and I hope that my right hon. Friend the Minister for Local Government and Environmental Services will not think me rude if I return to it when I have made my contribution to the debate. I particularly wanted to express my gratitude and appreciation to him.
The right hon. Member for Heywood and Royton and I pressed my right hon. Friend extremely hard at an earlier stage to include a clause of this type in the Bill. He has been good enough to discuss the matter with us privately and to propose the clause. I should like to express my gratitude for that. He has kept his word and kept us and the House fully informed. I hope that my right hon. Friend will not be embarrassed by my compliments, but this has been a model of how Ministers and Back Benchers can sometimes work together for the common good. In addition, I should like to thank him for the way in which he introduced the clause. What he said about the responsibilities of the House and the need to survey closely the way in which expenditure is made was entirely right. I endorse every word that he used.
It is within the knowledge of all hon. Members that some of us have worked and are continuing to work hard in order to ensure that the people's representatives on the Back Benches obtain a better opportunity to scrutinise what is being done by the Executive in their name. It is a commonplace to say that Governments are necessarily secretive and that they prefer to do their work behind closed doors. That is not necessarily because their motives are wrong. They are under heavy pressure, they have huge responsibilities and the work must get done. Yet it will not do in a democracy.
In no respect is it more important to survey what the Government are doing than in the way that they spend money. The right hon. Member for Heywood and Royton was correct in saying that we on the Back Benches have a duty to do our utmost to ensure that when money is spent, the best possible value is obtained for it. Many of us hive argued that we need better information to carry out that surveillance. Some of us have taken and expressed the view that it is our right as well as our duty to follow public money wherever it goes.
I do not doubt that the right hon. Member for Heywood and Royton was right to emphasise reassurance. Many of us are aware of the anxiety of those doing important practical work in the Civil Service, local government and nationalised industries that their work may be interrupted or frustrated if too many people are continually peering over their shoulders with a view to auditing and bringing into the spotlight the minutiae of their daily decisions.
I remember such anxieties being expressed when it was proposed that the Exchequer and Audit Department should have the duty of surveillance of the work of the University Grants Committee. It was thought that that would destroy the independence of the universities, but the surveillance of the Comptroller and Auditor General turned out to be a useful and valuable tool, not least for the UGC. The committee found that having an independent body to which it could refer its methods and workings and against which it could check its efficiency reinforced its work. I have no doubt that it will be the same with the local authorities and, in clue course, the nationalised industries.
A number of right hon. and hon. Members on both sides of the House have tried to make this a reforming Parliament. We have made substantial progress, but there is more to do, and we may be able to discuss that matter next week when we debate how the House can more closely scrutinise Estimates.
In the meantime, I congratulate my right hon. Friend the Minister on the important part that he has played in our efforts. The new clause, dull though it may be, is a milestone in the progress that we have been attempting to make.

Mr. Cartwright: I too welcome the new clause, which is an important step towards increasing accountability and strengthening control over spending. I accept what the right hon. Member for Heywood and Royton (Mr. Barnett) said about strengthening the activities of local government by providing a genuinely independent judgment of the effectiveness, and impact on local authorities, of Government spending and legislation.
However, we ought to be concerned about the sensitivity of local authorities. One of the most important problems was the feeling that the affairs of an individual local authority might be included in a report and brought before the House for scrutiny. The right hon. Member for


Heywood and Royton went to considerable trouble to deal with that problem when he moved on Report a new clause providing that any report from the Comptroller and Auditor General should not refer to the affairs of any authority in a way that identified it by name or otherwise. He said that his new clause
specifically provides that the Comptroller and Auditor General will not be able to report on any individual local authority. That is rightly a matter for the audit commission and local authority auditors. That is their function, and not that of the House, or the Comptroller and Auditor General."—[Official Report, 5 April 1982; Vol. 21, c. 746.]
The right hon. Gentleman's statement went a long way to reassure those in local government who are extremely sensitive about their relationship with the Government. They believe that their accountability is downward to their electorate and it would be undermined if the House scrutinised individual local authorities.
We welcomed the attitude of the right hon. Member for Heywood and Royton, but our reassurance was undermined by a statement in another place by Lord Bellwin. The statement has been drawn to the attention of a number of hon. Members by the Association of Metropolitan Authorities, which is clearly worried about it. Lord Bellwin said:
It will be open to the commission … to identify individual authorities … if it so wishes.
He went on:
There is nothing in Clause 24 to prevent the Comptroller and Auditor General from identifying individual authorities in his report to Parliament."—[Official Report, House of Lords, 10 June 1982; Vol. 431, c. 381–2.]
That has clearly started alarm bells ringing in some local authorities. It may be that they exaggerate the issue, but if we are trying to get good will in local government it is important that we have due regard to susceptibilities in such matters. I hope that we shall be able to reassure them that individual local authorities will not be reported to Parliament in the way suggested by the noble Lord in another place.

Mr. Timothy Smith: I start by declaring my interest. I am a chartered accountant and parliamentary adviser to the accountancy profession, which I hope will benefit from the proposals in the Bill. I think that it will, as long as the fees are fixed at a sensible level. I do not expect to benefit personally.
The audit of local government undertaken by some firms of accountants is not particularly profitable, although the fees have recently been raised marginally. There must be substantial investment in research and development before a firm can enter the field.
I welcome the new clause. I congratulate my right hon. Friend the Member for Taunton (Mr. du Cann) and the right hon. Member for Heywood and Royton (Mr. Bennett) on their initiative. I also commend the Government for accepting their proposals. By accepting this proposal the Government have rounded the circle for the audit commission.
Some felt that if there were to be changes in local government audit a national audit office was the right solution and that parliamentary accountability was important. Some in local government properly felt that this was not the sphere for the Exchequer and Audit Department.
There is clearly room for improvement in the present arrangments for local government audit, but that does not mean that there is any criticism of the district audit service. Its members are experts in the field. However, by definition their experience is limited to the audit of local government.
Although in theory councils can choose either an approved auditor or the district auditor under the Local Government Act 1972—some have, although only a small minority—in practice that has not worked. One reason is that there is no provision in the law for local authorities to consider the matter. A company has to consider the matter every year at its annual general meeting. There is no such provision for a local authority to consider it since the passing of the Local Government Act 1972, which is unfortunate. Therefore, it is appropriate that the Government should seek to introduce changes.

Mr. Christopher Price: The hon. Member for Beaconsfield (Mr. Smith) has compared local authorities and companies. However, when companies consider the matter they have the undoubted right to choose their own auditor and not have an auditor that they might not want imposed on them by a superior body. Does not the hon. Gentleman think that local authorities should also have the right to choose their auditors?

Mr. Smith: That is a difficult question. It is the shareholders of a company who appoint the auditors at a general meeting. Who are the shareholders in local authorities? Are they the councillors or are the councillors more akin to a board of directors? Are not the shareholders in a local authority the ratepayers? They are the people who provide the finance in the same way as the shareholders of a company. How can we arrange a device for ratepayers, meeting annually, to choose the auditors? The answer is that we cannot. Therefore, we have to have a procedural device called the audit commission. That seems to me to be entirely reasonable. The audit commission will include representatives of different interests.

Mr. King: I hope that my hon. Friend is aware that he is on pretty strong ground, although the hon. Member for Lewisham, West (Mr. Price) seemed to challenge his argument. Both the Layfield committee and the advisory committee on local government audit which was appointed by the Secretary of State for the Environment under the previous Labour Government took the view that it is not right that a local authority should appoint its own auditor.

Mr. Smith: I am grateful to my right hon. Friend. I was aware that the Maynard committee was much in favour of an audit commission. One of the unfortunate and undesirable aspects of audit in the United Kingdom is the clear divide between the public sector and the private sector. Compared with Canada, for example, we have little cross-fertilisation of ideas or audit techniques between the two sectors and there is far too little cross-border co-operation.
One of the great virtues of the audit commission, which will be responsible for both the district audit service and private firms of auditors, is that the commission will be in a position to remedy the problem and to ensure that local government benefits from the experience of both the district audit service and auditors in the private sector.
In Committee, the hon. Member for Lewisham, West (Mr. Price) attacked some of the private firms of


accountants currently involved in local government audit. In a way, I was glad he did. It brought home to those firms something that they had not appreciated hitherto. They now realise that if they become more involved in this area in future, it is inevitable that from time to time they will be in the political firing line. For most of the time, they will be dealing with professional and competent local government officers and members, but from time to time they will be dealing with politicians, who are concerned not so much with value for money in local government as with rather narrower political objectives, which they seek to achieve whatever the cost.
As I have said, the first proposal for change in local government audit was the audit commission, which is the Government's proposal. The second was the Public Accounts Committee's proposal of a national audit office. There were serious constitutional objections to the second proposal from local government. I understood the reservations that it had about the PAC's proposal. They were based on the audit of individual local authorities becoming the responsibility of the Comptroller and Auditor General if the district audit service had become part of the Exchequer and Audit Department.
Local government associations accept that if there is to be some change in local government audit, the audit commission is the right change to make. That leaves open the important issue of parliamentary accountability. The right hon. Member for Heywood and Royton (Mr. Barnett) has referred to the £10,000 million of rate support grant, which accounts for about 30 per cent. of local government spending. It is only right that Parliament should be able generally to examine how that money is spent. That is why the new clause is such an ingenious device in achieving that objective. I pay tribute to its authors and to the Government for going along with it.
When the new clause was discussed in another place, much of the criticism directed to it was based on a misunderstanding of what is proposed. The criticism was based largely on the premise that the clause would result in yet further erosion of local government autonomy and yet another group wanting to investigate yet another aspect of local government affairs. However, subsection (3) makes it clear beyond all doubt that
no information shall be required by the Comptroller and Auditor General under this subsection in respect of any particular body." Therefore, no local authority can be the subject of a particular report.
Sometimes when local authorities are criticised for employing additional staff and spending additional cash, they respond to the criticism by observing that they are doing it only because of the additional obligations that have been placed upon them by Parliament.
Reports prepared under the new clause will be

"(a) of the operation of any particular statutory provision or provisions; or
(b) of any directions or guidance given by a Minister of the Crown".

That will enable Parliament to assess the validity of claims by local authorities and to decide whether the claim that we have placed intolerable burdens on them is justified. That is another reason why we should welcome the new clause. Although it is a late addition to the Bill it provides arrangements which will work well.
Local authorities will benefit from the widening of audit experience. Ratepayers will benefit from the greater value for money that will result from the exercise. Parliamentary accountability of local authorities in general

terms will be increased. The Public Accounts Committee, with the help of the Comptroller and Auditor General, will be able to examine value for money in local government, so the taxpayer will benefit. I welcome the establishment of an audit commission. I hope that before long its chairman and members will be appointed and that it can begin its important work. I wish it well.

Mr. Christopher Price: We welcome the hon. Member for Beaconsfield (Mr. Smith) back to his place. It must be gratifying that he has so quickly become parliamentary adviser to the accountancy profession. I have been critical of the accountancy profession and I shall explain why, but we need its expertise in the House, and it is nice to have the hon. Gentleman back, if representing slightly lusher pastures.
The question that I put in Committee was a type of quis custodiet question: who will audit the auditors? Underlying all the praise of the brand new quango—the audit commission—and the Comptroller and Auditor General having an input is the assumption that any public money spent on auditors and accountants must, by definition, be a good thing. Sometimes we can spend money on accountants—the good folk whom the hon. Member for Beaconsfield represents, and who do not come cheaply these days—when it could be better spent on textbooks, teachers and the nuts and bolts of local government.
We are subjected to waves. I remember in the 1960s when there was a fashion for time and motion studies. I was a member of a local authority which spent a great deal of money on such studies to no real benefit.
In Committee I referred to some worrying factors. One was that the accountancy profession has overtaken the medical and legal professions in the rewards available to it. The senior partner of the best of the big 13 can earn about £1 million a year. That story is attested to in Accountancy Age. I am not accusing the hon. Member for Beaconsfield of picking up £1 million a year, but accountants are extremely expensive people to hire.
Mr. Ken Sharpe, the head of the Government's accountancy service, has found it necessary to write and tell each of the big 13 to stop touting for public business. Auditors are meant to be professionals. They should not tout. People should go to them. I also drew attention to that matter in Committee. It is a worrying development; I put it no higher than that.
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I also drew attention to the activities of an eponymous firm in the city of Birmingham. As a result of auditing Birmingham's accounts, it found itself with a little consultancy money without anything going out to tender. It started with £10,000 and the figure crept up to £30,000 and then to £65,000. There should be some rules about the difference between audit and consulting. There should be no room for suspicion that the only reason that big firms are moving en masse out of lucrative private work into extremely lucrative local authority audit work is to earn big consultancy money, especially with the micro-technology work that must move into local authorities in the next few years and which will be expensive to install. I do not believe that they do it for love rather than for money. It is worth pointing those matters out amid the welter of congratulation.
The hon. Member for Beaconsfield was right to point out that some of the big 13 are in difficulty in the United


States. Arthur Andersen, for example, received an $80 million judgment against it for its involvement with the Fund of Funds. Such firms are not anxious to get mixed up in political controversy, but, in his heyday, Arthur Andersen was best known not as an accountant but as the opposition leader in Greenwich and as a Conservative parliamentary candidate. Another problem is that there are few Labour parliamentary candidates among the partners of the big 13 of the accountancy profession. I acquit my right hon. Friend the Member for Heywood and Royton (Mr. Barnett). I am not making an issue of the matter, but it should be borne in mind that there are accountants among politicians in Parliament as well as on local councils.
I welcome the amendment. I shall say a little about Lord Bellwin later. I knew him by another name at school.

Mr. Graham: I do not remember him.

Mr. Price: He was a little older than us. I welcome the activities of the Comptroller and Auditor General. He might make some sense of the problem that I described when we discussed the previous clause. The Department of the Environment tells local authorities "Cut your expenditure" and another Department says "Increase your expenditure." That cannot be good government. There must be a better way.
I am sure that when my right hon. Friend the Member for Heywood and Royton and the Comptroller and Auditor General receive a report from the audit commission, which will no doubt draw attention to that type of problem, they will provide useful reports to Parliament demonstrating the difficulties facing local authorities when they receive contradictory directives from Departments of State.
At the moment, local authorities have no means of knowing what to do. With recent litigation in the courts, they are spending a great deal of money on counsel's opinion as to whether they are in jeopardy of breaking the law. I am sure that if the Comptroller and Auditor General applied his mind to the problem of contradictory advice and how to cope with it, much good would come from it. It is a genuine worry. Local government has difficulty knowing whether it is government at all or whether chief executives are to be mere préfets to some Minister in Whitehall. It is important to keep local government alive and to give people a motive for serving on councils.
Why did Lord Bellwin say that there was nothing in clause 24 to prevent the Comptroller and Auditor General from identifying individual authorities in his reports to Parliament? What on earth was he talking about? My reading of the clause is a little different. It clearly states that
no information shall be required by the Comptroller and Auditor General under this subsection in respect of any particular body.
Was Lord Bellwin simply asleep, or did he not understand? We need to hear the Minister's interpretation of Lord Bellwin's remarks. I advise the House to trust my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), because I think that he is right. I do not think for one moment that the Comptroller and Auditor General would identify a local authority in a report to Parliament. I believe that local authorities can be reassured about that. Nevertheless, we cannot leave the matter until the Minister has interpreted Lord Bellwin's remarks. I look forward to hearing that interpretation.

Mr. Dover: I rise to intervene briefly to applaud the speech of the right hon. Member for Heywood and Royton (Mr. Barnett) and his emphasis on the need for value for money. I spent nearly three years working for a large local authority and, indeed, for a sizeable quango, so I appreciate the urgency of that need.
I seek the Minister's assurance on one matter. Amendment No. 18 replaces the words "of local authority services" in clause 20(2) with the words
by such bodies of their services",
and so on.
As one who greatly favours the privatisation of services in local authorities and other bodies, I wonder whether there is a slightly suspicious reason for that rewording or whether the drafting has merely caused suspicion. Therefore, will the Minister confirm that it is not intended to stop privatisation? I believe that the greatest possibility for opening up opportunities for value for money lies in privatising many of the services in such bodies rather than allowing them to be carried out only by officers of those bodies, as now happens. I hope that the Minister will give that assurance.

Mr. Bob Cryer: I do not particularly welcome the clause, as it seems to propose a burgeoning of the Public Accounts Committee. That Committee, after all, merely considers decisions well after they have been made. It then makes reports, most of which are not discussed. In any event, it is usually too late by then to do anything about the matter involved. We elevate that Committee to great importance, but its importance is generally overstated.

Mr. Timothy Smith: Will the hon. Gentleman give way?

Mr. Cryer: I should like to develop my theme a little further before I give way. I wonder why this additional clause has been pressed so hard. I know that many members of the Labour Party believe that it would be an advantage, but there is a delicate line between central Government and local government. Local government has its own accountability.
It is, after all, elected. There is often a clash between central Government who say they are elected on one set of ideas and a local authority which says that it is elected on another set of ideas. This sort of clause seems to tilt the balance towards central Government, and the Government of the day control this place. This is not the open debating Chamber that mythology suggests. If the Government want to provide time for discussing reports, they will do so. If not, they will not provide an opportunity. It is a tilt not so much towards Parliament as towards central Government. After all, the audit commission will be appointed by central Government.
Local authorities do not have the secrecy that bedevils central Government. They are open. I remind the House, in its concern with the scrutiny of local authority expenditure, that the standard of conduct in local authorities, by and large, is vastly superior to the standard of conduct in this place. People who have financial interests are not allowed to debate in local authority committees. If they are council tenants and the local authority is discussing rent increases, they have to obtain special permission from the Minister to be present, or even to vote.
For example, it has been held that people who are unemployed and serving on a council cannot discuss


measures to alleviate unemployment without first obtaining a dispensation. The scrutiny of local government is much tighter. In any case, local government has always, historically, displayed a much better control of expenditure than central Government.
A warning about the clause has already been given by the hon. Member for Chorley (Mr. Dover)—the man who tried to have two jobs when he came into this place; one in local authority and one here. He said that he wanted value for money. That is the usual cliché Tories use about every Labour-controlled local authority. They want to claim that local authorities are inefficient and wasteful. This clause will be used for that attack. Local authorities, by and large, provide services that cannot be provided by any other organisation. They provide them efficiently and councillors scrutinise that expenditure with care and diligence. Of course we know that there are exceptions, but, by and large, there is truth in that statement.
I am also worried about another matter. These reports and the enhanced power of the Comptroller and Auditor General are not related to the position of the accounting officer of the Department of the Environment. The accounting officer, under section 22 of the Exchequer and Audit Departments Act, 1866, has some power and often it is not realised what it is. The accounting officer is generally the permanent secretary of the Department. The accounting officer can say to the Minister, "I feel that this expenditure cannot be justified before the PAC." The Minister trembles and says that it must be reconsidered. In other words, the permanent secretary has considerable influence that he can use to push forward ideas if he so chooses.
One of the extraordinary things, for example, about the Department of Industry between 1974 and 1979 was that two minutes written by the accounting officer at the Department of Industry, were not about Concorde or about lavish expenditure—necessarily lavish—to support British industry, but about two workers' co-operatives. That is either a political judgment of the accounting officer or a remarkable coincidence.
The point here is that if the Comptroller and Auditor General receives a report that also covers the ground of a minute by the accounting officer, and duly reported under direction to the Comptroller and Auditor General, that accounting officer has a way into the whole of the local government area that is denied to the accounting officer and the present bureaucracy in the Department of the Environment.
At present, if the Secretary of State makes a decision about expenditure; if the minute is sent by the accounting officer to the Comptroller and Auditor General, in accordance with the general instructions, that he will carry out the Minister's decision only on a written instruction overruling the objection; and if the instruction says:
He should then send the papers to the Comptroller and Auditor General and inform the Treasury of the circumstances";
it is up to the Secretary of State to justify that expenditure. There is now a possibility that a minute can be sent about something that is dealt with by a local authority which places the onus on the local authority to justify the expenditure by virtue of representations to the Comptroller and Auditor General. Therefore, the area of accessibility through the power of the accounting officer is broadened. That is a consideration that has not been mentioned in the debate so far.
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I may be over-suspicious about this, but the power of the accounting officer is not widely known. Often, he is an element of discussion when decisions are being made by an elected Government, and there is a narrow line between the operation of the Department of the Environment and the operation of the local authorities.
Local authorities are right to have reservations about this matter, because they face a continuing battle with the Department of the Environment to obtain more funds.
There is, of course, a case for saying that the costing of new obligations placed on local authorities should be calculated, but local authorities do that anyhow without the necessity of introducing legislation to authorise such studies.
I do not find the new clause helpful. I suspect that it will not be helpful to local authorities, but we shall have to wait and see. In the rneantime, I shall be interested in the Minister's comments on the relationships that I have outlined.

Mr. Michael Morris: Initially, the hon. Member for Keighley (Mr. Cryer) seemed to say that he had no confidence in the Public Accounts Committee, but in his final remarks he outlined the strength and the responsibility of the PAC in so far as the accounting officer reports through the Comptroller and Auditor General. Therefore, the hon. Gentleman undermined his case from the start.
It was not the Government's wish that the new clause should be introduced. It is only because of the pressure of the House that it is before us at all, and that is something of which the House should be proud. My right hon. Friend recognised the feelings of the House, and his Department put forward some proposals which to a large extent met what we were seeking to achieve. To that extent, I say a sincere "Thank you" to my right hon. Friend.
The word "body" appears at the end of new clause G(3), which states:
under this subsection in respect of any particular body.
A point was made by the hon. Member for Lewisham, West (Mr. Price) and others about not naming individual authorities, and I share and respect that view, but what happens with a body that is not a rating authority?
Although it is not a rating authority, the London Boroughs Association, on which I used to sit, undertook major studies of areas that were important to those of us working in local government in London. At some time the Audit Commission may wish to examine an activity of the London Boroughs Association. Presumably, under this subsection, the officer in charge at the Audit Commission will be precluded from undertaking any review of the association's work. I should be grateful for clarification.
It seemed to me when we took evidence in the Public Accounts Committee that from the start the one problem that the House has never tackled is that local government, like it or not, has to accept any legislation that goes through the House. Until recently, the financial effect of legislation on local authorities has mostly been uncosted. There used to be the little phrase "It is not thought that this will have any adverse financial effects on local authorities or they will be minimal", but when one was on the receiving end the effects were not always so minimal.
If nothing else, the new clause and the Bill will enable local government to highlight those occasions on which it is charged to undertake a policy and is given inadequate


resources to do so. That safeguard would be of great benefit to local government. The proceedings today on the Bill have highlighted the continuing deficiencies in the National Health Service and the nationalised industries. I hope that my right hon. Friends' colleagues in the Departments responsible will respond in the same manner as he has.

Mr. Graham: I do not use the phrase tritely when I say that this has been a valuable discussion. Reviewing what has happened to the initiatives in another place since this matter was last before the House and listening today to the practical experience in local government of the hon. Member for Northampton, South (Mr. Morris) and other contributions, I can say that the speakers are very experienced in local government and therefore they merit our respect. Considering the contributions that have been made by my hon. Friends, I am satisfied that the amendment has come under close scrutiny.
The hon. Member for Northampton, South, who was a member of the Public Accounts Committee, said that no Government would have had the initiative to bring this measure forward. The debate was initiated not by the Government but by individuals who were then backed by the Opposition. I have a shrewd suspicion that the Minister made a calculated guess whether, had he resisted the measure, he would have won or lost the day. It is a normal parliamentary convention for a Minister to prevail upon those who have proposed any change to withdraw their proposal in order that he might redraft it. The Minister has shown that he was at one with those who generally supported the principles proposed.
The Minister must grasp the points made by the hon. Member for Woolwich, East (Mr. Cartwright), my hon. Friend the Member for Lewisham, West (Mr. Price) and, obliquely, my right hon. Friend the Member for Heywood and Royton (Mr. Barnett). It is essential that any suspicion about the Government's intentions to put flesh on the bones should be cleared up. Some comments have clouded the issue, but I know that the Minister will explain the matter to us. I shall be satisfied if he says that that was not in his mind at the time. The words in the Bill make it clear that what the Minister said is not possible. Yet, in Committee, the Minister—with a brief or perhaps off the cuff—used words that could be misinterpreted outside the House.
It would cause terrible damage to a good concept if it were suspected that, not necessarily for political motives, a witch hunt or identification may be carried out under the cloak of the Bill. We must demonstrate tonight and in ministerial statements that the trust and confidence that are prerequisites to the relationship between local and central Government will be strengthened, not damaged, by the clause.
I am grateful to my right hon. Friend the Member for Heywood and Royton for stressing the independence of the Comptroller and Auditor General. He must be independent of everyone with whom he must work, so that he can criticise them fairly and honestly.
My hon. Friend the Member for Keighley (Mr. Cryer) was right to say that the line between central Government and local government on responsibility is thin. There is no doubt that local authorities are responsible to those who elect councillors for the money that they raise and spend.

Equally, Parliament has responsibilities. Many references have been made to the colossal sums of money with which we deal. It is amazing to someone who has come on the scene rather late, as I have, that for many years Members of Parliament have been slightly uneasy because they could not find the right mechanism to show Parliament's responsibility for the money that it raises. The proof of the pudding must be in the eating.
It is clear that the original words have been improved in another place. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) acknowledged that the Minister has done justice to our intentions. However, we must ensure that we do not load too much responsibility on local government. I do not say that to be accountable, prudent, wise and honest is a great burden, but the Local Government, Planning and Land Act 1980 lays down many additional responsibilities for accountability, presentation and public relations.
No one can oppose the idea that people have a right to know. Local authorities have responsibilities, even when the Government are screwing down their opportunities to raise money and directing how that money can be spent.
I am a little apprehensive about causing resentment in local government by appearing to interfere. The House has said that Parliament will not interfere with the proper discharge of the functions of local government. We need to present to the people a marriage between local councillors and Parliament in the control of the money that needs to be spent. We have been left in little doubt that there is disquiet within the ranks of local government about what is seen as the Government's arrogance in seeking power over local government where it does not believe it to be necessary.
I have been approached by local Labour councillors—and I am sure that Conservative Members have been approached by members of their party—who are suspicious about Parliament's motives in carrying through this measure. I understand that they are as jealous of their position as were those of us who served as councillors. We acknowledge that local government has a constitutional responsibility and is accountable to the electorate. Nothing in the clause interferes with that principle. Parliament is accountable to its electorate. The test whether we have this right will be seen in practice.
I am heartened by the conditions that are required to be fulfilled before anything can happen.
Subsection (5) of new clause G provides:
Before undertaking or promoting any study under this section the Commission shall consult".
Not only does it state that there shall be consultations, but it sets out with whom the consultations shall be carried out. It refers to
such associations of local authorities or other bodies whose accounts are required to be audited in accordance with this Part of this Act as appear to it to be concerned and such associations of employees as appear to it to be appropriate.
If there were enormous disagreement by any association or by any association of employees, it would be difficult to envisage this proposal getting off the ground. There is an onus on the audit commission and on the staff of the Comptroller and Auditor General to assure employees and councils about the manner in which this proposal will be carried out and about its implementation being essential. The Opposition expect a steady march towards greater and more effective government from the implementation of the new clause.

Mr. King: I agree with the closing remarks of the hon. Member for Edmonton (Mr. Graham). I took them as a message to local authorities and councillors, of both his party and mine, of the approach that might be adopted. I listened with interest and I agree with the majority of what he said.
It was unfortunate that some of the hon. Gentleman's historical allusions were slightly incorrect. A new clause along these lines was moved on Report, not by the Government, but by the right hon. Member for Heywood and Royton (Mr. Barnett). It has been welcomed and discussed with interest by myself and my colleagues. After the mathematics had been done by right hon. and hon. Gentlemen on the Opposition Benches they decided, rather grudgingly, that they had better come along with us.
I do not want to dwell on that, because there is no suggestion of any such cold calculation on the part of the Government, We examine these issues entirely on their merits. It should be said to the hon. Member for Keighley (Mr. Cryer), as my hon. Friend the Member for Northampton, South (Mr. Morris) did, that although he may see a sinister Government plot in everything, this was originated in the House of Commons, but not by the Government. But that does not mean that it was right, as I am sure he will be the first to tell me.
I welcome back my hon. Friend the Member for Beaconsfield (Mr. Smith). I enjoyed campaigning with him on his earlier success and I am glad that he managed to achieve his more recent success without my intervention. His contribution, and the interest that he has taken for some years in both his professional and advisory capacity, is something that we welome in the House, because he speaks with real experience. I noted his comments and was pleased with the welcome that he gave to the amendment.
On the other hand, my hon. Friend found himself crossing swords with the hon. Member for Lewisham, West (Mr. Price), and will no doubt find himself doing so again. The hon. Member for Lewisham, West on the strength of one article in Accountancy Age has already filled about 45 columns of Hansard and will no doubt seek to deploy these arguments again. The salary of the senior partner has gained a few noughts since we last heard of it. No doubt it is index-linked, which will have an impressive effect.
The hon. Member for Lewisham, West asked an interesting question, and drawing on the lessons never forgotten from days on the benches under the eagle eye of Mr. Scott, whom we learnt to love in Committee—quis custodiet ipsos custodes—it is a fair question. Despite what people think, the possessor of a Somerset accent occasionally manages some classical background. The question here, as my hon. Friend the Member for Beaconsfield pointed out, is: who will appoint the auditiors? At the moment, individual authorities are entitled to appoint their own auditors.
The Layfield committee had a strong representation of disinguished local councillors of both parties with no party political axe to grind. They took the view that it was wrong that local authorities appointed their auditors, and that the system should be changed. Under the Bill, the audit commission will appoint the auditors. Quis custodiet ipsos custodes? The question then comes: who will audit the audit commission? The Comptroller and Auditor General will do that and, to the distress of the hon. Member for

Lewisham, West, the Treasury will audit the Comptroller and Auditor General. Those are the sentries and guards posted along the line.
The other distirtgished alumnus of the alma mater, if we are working entirely in the Latin tongue, is my noble Friend Lord Bellwin. He said that there was nothing in clause 24
to prevent the Comptroller and Auditor General from identifying individual authorities in his report to Parliament." —[Official Report, House of Lords, 10 June 1982; Vol. 431, c. 382.]
Concern was expressed that that appeared to be in direct conflict with Lord Bellwin's statement that no information should be required by the Comptroller and Auditor General under this subsection in respect of any particular body. I shall say briefly why I do not think that there is any conflict between those two statements.
The clause refers to the powers of the Comptroller and Auditor General to try to obtain information about individual bodies or to publish information that is riot otherwise available. It is possible that the commission will publish these studies, and they may refer to individual authorities. If that were so, it would be pointless if the Comptroller and Auditor General could not refer to those studies. However, he cannot have access to any privileged information held by the commission but—this is the point that I am seeking to make—he can quote published information. I see nothing improper in that. If the commission identifies individual authorities in its reports, the Comptroller and Auditor General can quote that.
In case this seems a remarkable and perhaps shocking situation, I should add that in any case we are requiring local authorities to publish considerably more information than hitherto about their activities. The Chartered Institute of Public Finance and Accountancy publishes a vast range of information about individual authorities. The only names of individual authorities that will come forward to the Comptroller and Auditor General will come from the commission reports, and it has already been made clear that there will be a significant element of local authority representation on the audit commission. Thus, local authorities will have a real say in the way that these studies are tackled. Although, at first sight, there may appear to be some conflict, in fact there is total consistency. It would be ludicrous if, no matter how widely published and distributed this information was, it was then suppressed by the Comptroller and Auditor General.

Mr. Christopher Price: No one is asking the Comptroller and Auditor General to suppress anything. The impression that we all gained from the speeches of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and the right hon. Member for Taunton (Mr. du Cann) was that the Comptroller and Auditor General would confine himself to general value for money issues related to statutory provisions, Government directives, Government advice, and so on, and to matters that he could investigate. If he cannot require information from individual local authorities, what is the point of referring to them in his report?
Perhaps we can accept Lord Bellwin's statement that the Comptroller and Auditor General can refer to published authorities and that there is nothing in the law to say that he should not do so. What worries me is that the Minister appears to be condoning the idea that the


Comptroller and Auditor General should go beyond the general statement and allude to other information about particular local authorities.

Mr. Joel Barnett: Obviously, local authorities may publish information about themselves that will be available both to the Comptroller and Auditor General and to everybody else, even the noble Lord, but one thing is clear, and I hope that the Minister will comment on it. There will be no intention under the clause of the Comptroller and Auditor General reporting on any individual local authority. He would not be able to require any such information from a particular body—an individual local authority—and certainly he would have no intention of reporting on an individual local authority. Nor would the Public Accounts Committee have any intention of dealing with the affairs of any individual local authority.

Mr. King: I am happy to endorse what the right hon. Gentleman says, and I know that the House will have listened with interest to that categorical statement from the Chairman of the Public Accounts Committee.
We should come back to what we are talking about. The commission is to prepare reports on
the impact … of the operation of any particular statutory provision or provisions; or … of any directions or guidance given by a Minister of the Crown
on the
economy, efficiency and effectiveness in the provision of local authority services".
If it is clear that ministerial direction is having a particular impact in different areas, and if the commission happens to draw attention to it in particular areas, it appears to me reasonable that the Comptroller and Auditor General should be entitled to report that. The House may have thought it odd coming from a Minister, but I said earlier that the main impact of the clause relates to ministerial accountability, statutory provisions—the House must understand what is happening—and the direction or guidance given by a Minister.
The hon. Member for Lewisham, West made the fair point that it will enable questions to be asked about the way in which the Government are dealing with local authorities over the requirements that are being laid upon them. If the reports and studies quote that impact on individual local authorities—those reports coming only through the commission and not as a result of further detailed searching and intervention by the Comptroller and Auditor General—I see nothing wrong with that.

Mr. Kaufman: In the closing moments of the debate it is extremely important that we get this right. What is said in the debate on the final Lords amendment will be read with care by local authorities, which are deeply concerned about the implications of the amendment. The purport of the speeches of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and others has been to seek to demonstrate that there is no need for that concern.
I can understand why the Minister has sought to reconcile—I do not criticise him for it—the statement of his noble Friend Lord Bellwin in another place with the Lords amendment. We can say what the Minister is unable to say, which is that his noble Friend made an embarrassing slip, which the Minister is now doing his

best to reconcile with the Bill. But his zeal to protect his noble Friend, on which we congratulate him, must not be allowed to intrude in any way upon the clarity of the assurance given by my right hon. Friend the Member for Heywood and Royton, which local authorities will value. We look to the Minister to repeat that assurance with the same clarity. Let us now set aside Lord Bellwin's words and keep that assurance.

Mr. King: I am intrigued by the right hon. Gentleman's contribution. He has a charming way of referring to me and saying that I have a role in life, which is to follow behind my right hon. Friend the Secretary of State, rather like the gentleman with the shovel at the Lord Mayor's show. I now realise that he has twisted this further and that the idea is that once he has got me with the shovel in my hand suitably loaded I should transfer the load on to one of my colleagues, whom he feels should suffer similarly. I am sure that the hon. Member for Lewisham, West will agree that that was a very unfortunate unprovoked attack on a former school chum of the right hon. Member for Manchester, Ardwick (Mr. Kaufman). I felt that it was my duty to protect my noble Friend.
There might be a misunderstanding over the word "identifying". My noble Friend said:
There is nothing … to prevent the Comptroller and Auditor General from identifying individual authorities". —[Official Report, House of Lords, 10 June 1982; Vol. 431, c. 382.]
What he said can be taken in two ways. He was saying that there was nothing to stop the Comptroller and Auditor General from mentioning the names of authorities which had already been identified in the commission's report. That is not a complicated item. If the commission mentions the names of local authorities, there is nothing to stop the Comptroller and Auditor General from repeating those names in his report. I do not see anything wrong with that. I entirely endorse the basic approach of the right hon. Member for Heywood and Royton.

Mr. Kaufman: We are grateful for that clear, categorical assurance, which will be much appreciated by local authorities. I congratulate the right hon. Gentleman on having demonstrated that he is able to clear up not only after the Lord Mayor's procession, but after a donkey.

Mr. King: My hon. Friend the Member for Chorley (Mr. Dover) is worried about amendment No. 18. There is nothing sinister about it. The amendment clarifies one aspect of the comparative studies and makes it clear that they stand distinct from the new clause.
My hon. Friend the Member for Northampton, South asked whether it would be possible for the audit commission to study the London Boroughs Association. That would not be possible. Clause 6 lists the bodies that the commission can audit.
I listened with interest to the hon. Member for Keighley, but found it difficult to follow the point that he was making. His historical allusions were interesting, but it was difficult to see how the accounting officer would have more than a tenuous connection with the matters under discussion. However, if I have failed to understand the right hon. Gentleman's argument and he wishes to pursue it I shall be happy to write to him.
I gave the right hon. Member for Heywood and Royton an assurance about ministerial accountability. I also gave him the further assurance for which he asked. We will give


every encouragement to the commission to co-operate fully with the Comptroller and Auditor General. Our task will be to establish the audit commission and the proposals in the amendments, which will improve ministerial accountability, will then be put into effect.

Question put and agreed to.

Lords amendments Nos. 19, 22 and 23 agreed to.

Orders of the Day — African Development Fund

The Minister for Overseas Development (Mr. Neil Marten): I beg to move,
That the draft African Development Fund (Third Replenishment) Order 1982, which was laid before this House on 21 June, be approved.
I welcome the hon. Member for Birmingham, Ladywood (Mr. Sever) to the Opposition Front Bench. I know that he has taken a close interest in these matters and I hope that we shall hear many of his sensible views in the remainder of this Parliament.
The purpose of the order is to authorise an increase in our payments to the soft lending resources of the African development fund. The United Kingdom has voted in favour of the proposed contributions, subject to the approval of Parliament. I shall describe the order in more detail in a moment, but first I shall say something about the fund, its place in the developmental scene and our attitude towards it.
The African development fund was set up in 1973, and it is an integral part of the international economic system. It serves as a charnel for joint multilateral action to help solve the urgent, but long-term, problems facing developing countries in Africa. The United Kingdom was a founder member of the fund. It has broadly the same developmental objectives as our own aid programme—to help the poorest countries. Our support for it reflects our historical interests in Africa. Thirteen independent African members of the Commonwealth have received ADF loans. The fund is, therefore, one of the channels by which we help the Commonwealth. We have always strongly supported it, and we shall continue to do so, within the limits of what we can afford.
Our own contributions will gear up a greater flow of money to the poorer countries, and to the poorest people within those countries. While the Government's policy is to put more weight where possible on their bilateral aid, this gearing-up effect from an appropriate basic share is one main argument for continuing our support to multilateral bodies.
I now turn in more detail to the draft order. The African development fund is a joint partnership to provide soft loans between the African Development Bank, which holds 50 per cent. of the votes, and these non-regional donors wishing to create a special multilateral channel to help the poorest countries in Africa. The bank was itself established at Abidjan in the Ivory Coast in 1963 but is legally a separate body.
Up till now all the members of the African Development Bank have been African States. However, they have recently ratified amendments to their agreement so as to allow non-regionals, including the United Kingdom, to join. 1 hope to present a similar draft order to the House for this purpose in the autumn, together with the necessary order to give the bank the privileges and immunities that we shall be bound to extend to it when we join.
There are now 25 non-regional fund members, including all major Western donors except Australia and New Zealand, three OPEC countries—Saudi Arabia, Kuwait and the United Arab Emirates—and some developing countries from other continents.
About 80 per cent. of the fund's loans have gone to the very poorest member countries and this will continue.


Loans are interest-free with a service charge of 0·75 per cent., and are paid back over 50 years with a 10-year period of grace. The agricultural sector has received the largest share, 38 per cent., of the fund's resources, transport has received 26 per cent., public utilities 16 per cent. and education and health 15 per cent.
By the end of 1981 the fund had approved 213 loans amounting to $1,360 million. Of that, $331 million had been spent, giving a ratio of disbursements to commitments of about 24 per cent. This figure is improving over the years, but it is still low. That reflects the need to improve implementation of projects, and for more technical assistance to help achieve this.
The initial funding, a special increase and the first two replenishments, have provided resources of some $1,251 million for commitment between 1973 and 1981. The United Kingdom's commitments so far have totalled £31 million—about $58 million at the rate of exchange for this replenishment—of which nearly £8 million, or about $15 million, has so far been disbursed. Negotiations for the third replenishment of the fund's resources, to cover the commitment period 1982–84, started in January 1981. They were successfully concluded in February 1982.
The participating States and the African Development Bank have agreed to provide jointly some 1,008 million fund units of account—about $1,059 million. That is a 50 per cent. increase on the amounts put up for the last replenishment, which is not bad going considering the restraints on everyone's ability to help in the present economic circumstances. Our share, subject to parliamentary approval, will be 43 million fund units of account, about $45·2 million at the agreed exchange rate, or £24,170,300.

Mr. Eric Deakins: Will the Minister confirm that the expression "fund units of account" has nothing at all to do with the similar EEC expression?

Mr. Marten: Indeed.
That is a 4·3 per cent. share of the total replenishment—the same in percentage terms as our contributions to the last replenishment. The proposed replenishment and its terms and conditions were approved by the boards of governors of the African Development Bank and fund on 8 May 1982.
Special provision is included in the replenishment for 5 per cent. of the whole to be available for technical assistance on extremely concessional terms. This is an important new feature, which should help overcome the implementation and administrative problems that I have mentioned.
In accordance with the agreed resolution of the fund's governors, our subscription must be paid in three annual instalments starting on 1 October 1982 or not later than 30 days after the United Kingdom's instrument of subscription becomes effective, whichever is the later, payments will be in the form of the deposit of non-interestbearing notes encashable on demand. We expect them to be encashed over several years. It is only at the encashment stage that there will be an actual call for funds on the aid Vote. The draft statutory order authorises the Secretary of State to pay this subscription.
I should mention that we have just been advised that the agreed board of governors' resolution is numbered 9/82, not 10/82 as indicated in the draft order. This will be

corrected in the final version. This is not a printing error of Her Majesty's Stationery Office but an error of the bank.
Finally, the replenishment arrangements include provisions which envisage that other countries' contributions may be released more slowly for commitment if one or more of the donors fails to meet its obligations in full or in time.
I commend this draft order to the House in the conviction that the African development fund will continue to help the poorest countries of the region to solve their serious problems by promoting economic and social progress. Britain must play its full part in this important work.

Mr. Frank McElhone: I shall be advising my right hon. and hon. Friends not to oppose the order, but the House still has a responsibility to question the Minister on how our contributions to the African development fund have been spent, although he gave some illustrations, and on what action he and his Department have taken to ensure that money is getting to the poor and the poorest countries. This is an issue that we have raised continually at Question Time and in debates over the past three years.
Since the United Kingdom became a member of the fund in 1973, I gather that we have committed it to about £31 million and that only £7·8 million of that has been spent. If these figures are correct, it is a disgraceful performance by any standard and the Government must accept a great deal of criticism for it. As the African Business News stated last year, the African Development Fund is notorious for the slow disbursal of its funds.
We look to the World Bank for some guidance in these matters, but I understand that even its procedures can take up to seven years between the initial identification of a project and the country's receipt of the loan. Is it any wonder, despite the development fund and other aid agencies, that we still have 800 million people living and dying in absolute poverty? This crisis, especially in the poorest countries of Africa, has not been helped by the Government's decision to restrict the number of students from the poorest countries by the savage imposition of full-cost fees. This is an issue that my hon. Friends and Conservative Members have raised with the Government repeatedly. We have told the Minister that it is an extremely foolish "saving" to tell students from the poorest countries that they must pay full-cost fees if they are to come to the United Kingdom to be educated. The right hon. Gentleman knows that the Russians, the French, and others are taking full advantage of the situation.
The Minister must realise that if full value is to be derived from the various funds and from the money of United Kingdom taxpayers, steps must be taken to increase the numbers of trained personnel in the developing countries. It is the lack of such people that makes it difficult for full advantage to be taken of the money that is allocated by the aid agencies.
I listened carefully to the percentages that the Minister gave to the House and I assume that they refer to 1981–82. My figures refer to 1980. In that year the fund allocated $273 million to countries in Africa. About 46 per cent. went to agriculture, 26 per cent. to transport, 11 per cent. to public utilities, 10 per cent. to the social sector and 7 per cent. to industrial banking.
Why was no mention made of health and education in the figures for that year? The fund spent only 15 per cent. of the total allocation on health and education in 1981–82, and that is insufficient to attempt to eradicate the terrible diseases prevalent in Africa's poorer countries. Illiteracy and a lack of trained people to make use of the funds are critical reasons why more money should be spent on health and education.
The Minister will be bored with me for raising again the question of land reform. Will he concede that much of the money that goes to agricultural development, not only in Africa but in many other countries, ends up in the pockets of rich farmers and that the poor farmers lose out year after year? The Minister's radicalism, which was so evident before he became a Minister, might still linger. I hope that in the next series of meetings with development Ministers he will attempt to persuade countries in receipt of substantial funds from development agencies to introduce land reform. I hope that the Minister will consider the critical state of land reform in Zimbabwe. The desperate position there could be eased if more finance was allocated through the fund.
The Minister said that 15 per cent. of the money was spent on health and education. We are disturbed because much of the money allocated to health projects in Third world countries ends in the pockets of the multinational pharmaceutical companies. The World Health Organisation has reported on abuse by multinational drug companies. For example, excessive charges are made for simple products such as vitamin C. People from poor countries sometimes have to pay four times as much for vitamin C as we pay in Victoria Street. I hope that the Minister will pay serious attention to that.
A substantial percentage of the allocation is spent on transport. We have the figures, but we do not know on what type of transport the money is spent. Will the Minister consider the need for an all-purpose, tough, resilient vehicle along the lines of a project that I presented to the Department just before the last general election? I am sure that the papers on that project are available. I had the support of many skilled people in the motor industry. The project would be of immense value to poor countries lacking transport, especially in Africa.
With the euphoria of Brandt having largely disappeared from sight—it never emerged in the Government—and with the summits of Ottawa, Cancun and Versailles producing nothing but platitudes from the Prime Minister, the future of the poorest countries is bleak. If there is a touch of optimism in the Minister's speech, I draw his attention to what the Financial Times reported on 18 March. Its correspondent in Nairobi referred to the World Food Council report which was released on 17 March. He wrote:
Africa faces critical food problems in the 1980s … Food production on the continent per person fell 7 per cent. in the 1960s, declined a further 15 per cent. in the 1970s, and is likely to continue deteriorating this decade".
There is nothing to be complacent about in the allocations that we are making. They are insufficient to meet the basic needs of the poorest countries in Africa. I concede, however, that we face a serious problem of how to spend money in those countries and how to get the money to the poorest people in the shortest time. That responsibility lies with the Government as a member of the fund and as an intending member of the African bank.
Although the Opposition will not oppose the order, I hope that the Minister will recognise that we are not complacent about the needs of poor people in the countries to which I have referred. Their needs are a priority of Labour Party policy. I should like to think that before the next general election the 11 per cent. cut in aid in real terms will be made good. I should also like to think that the compassion and humanity of the communiqués will produce something for the poor people of Africa.

Mr. Bowen Wells: I congratulate my right hon. Friend on the orders. They demonstrate to Britainand the world that Britain cares about Africa, her poverty and the starvation suffered by many of her people. It demonstrates that in spite of many political disagreements with many African countries we still keep faith with the people of Africa and will try to improve the conditions in which many of them live.
The Government are to be congratulated. The hon. Member for Glasgow, Queen's Park (Mr. McElhone) is to be congratulated on welcoming the order. I am sure that it is not necessary to point out to him that the order refers to the African development fund. It does not have much to do with overseas students' fees or with the selection of projects in which the fund invests or to which it lends money. One of the features of the fund and the African Development Bank is that they are controlled by the African countries. That is to be welcomed. It means that African countries select projects and decide how money will be spent. They administer the scheme. It is a great development for African people. Whereas the World Bank and even our bilateral organisations are dominated by Europeans and European thinking, this bank is dominated by African thinking.

Mr. McElhone: I hope that the hon. Gentleman has not misunderstood me. To set the record straight, I did not say that the fund was responsible for sending overseas students here and paying their fees. I said that because full cost fees prevented many students from the poorest African countries from coming here, students do not go hack as trained agronomists and the other skilled people who are badly needed to ensure that the projects funded by the African development fund and other bodies come to fruition far more quickly than at present.

Mr. Wells: I am glad that the hon. Member has made that clear.
My right hon. Friend the Minister has made a substantial gesture towards the objectives that I think that we all share. I am sure that my right hon. Friend shares them with me, and I know that the hon. Member for Queen's Park does. Our objective is to increase the number of educated people in Africa. Against all the trends in the overseas budget, my right hon. Friend has increased the amount of money available for scholarships for the poorest of the most able people in Africa to come to Britain.
Of course, this is not enough. Many of my right hon. and hon. Friends and I greatly regret the way in which the overseas students' fees question has worked out. I believe that it should be changed. I make no bones about that. It is not right that Britain should effectively withdraw from teaching and helping the poorest people. It should be remembered, however, that many students from rich countries do not need subsidised places in our schools. The


children in our own constituencies need nursery education and the betterment of their own education more urgently than the children of rich parents overseas.
We must therefore develop a new policy. I hope that with consensus this can be done. I have always said that it is marvellous how much can be done in the House if we work together. I believe that we can work together on overseas student fees. It is, after all, a cross-party problem. It was originally brought up by a Labour Minister and if the Labour Party were in office it would no doubt have made the same, perhaps wrongly taken, decision.
It is an important feature of the African development fund that Africans decide its priorities. It is also important that my right hon. Friend has introduced this order to support the Africans in making their own decisions. Lo and behold, however, the African development fund finds itself facing the same problems as other development finance institutions in paying for its administration and overheads and disbursing its funds effectively.
I hope that my right hon. Friend will take note of the problem faced by all development banks, including the World Bank, in having to work through the host Governments. In considering overseas aid, it is a commonplace that the host Government do not usually consist of the poorest people in the country. Often, they are an elite who are concerned not to improve the conditions of the poorest members of their society but rather to bolster their own position.

Mr. William Hamilton: Like the Tory Government.

Mr. Wells: The hon. Member is quite wrong. It is entirely unlike the Conservative Government, as the order demonstrates. The Government are concerned and are showing compassion. They are not reducing their contribution to an African-dominated fund.
The African development fund faces the same problems as many similar development finance institutions. One of its problems is to whom it lends. It lends through the host Governments. One of the great problems of the cry for aid to the poorest—to which I strongly subscribe, as I know that my right hon. Friend does—is, how do you do it? The African development fund is suffering from precisely the same difficulties as other world institutions.
Agriculture and food are a great priority. According to its most recent report, one of the objectives that the African Development Bank has set itself is the conquest of hunger, poverty and disease. That policy favours agriculture, and specifically food production. The report shows that nearly 30 per cent. of its commitment is to agriculture. But does that produce food? In spite of that investment, many of those countries are increasing food imports. The internal policies of those countries discourage food production. The poorest people are not encouraged by the price and distribution mechanisms and the marketing methods. They are inhibited from increasing productivity because their countries have run out of foreign exchange. What does that say about the administration of those countries?
Many of those countries are the victims of world economic circumstances and their own problems of development—poverty, lack of education and so on—but often a shortage of foreign exchange is the result of poor administration. One can see from the fund's lending that

time after time in places such as Lesotho, Madagascar, Rwanda, Sudan, Somalia, Burundi, Ethiopia, Egypt, Mozambique—to name those merely concerned with agriculture—the loan given is primarily to make up for the foreign exchange difficulties which those countries are experiencing. They are, therefore, unable to buy spare parts and import the technology and organisation necessary to improve and increase agriculture and food production. The solution to the problem is often in the hands of those Governments.

Mr. Eric Deakins: The hon. Gentleman will not wish to have it on record that he believes—if he does he will be the only hon. Member to do so—that the major reason why African and other developing countries have balance of payment crises and a shortage of foreign exchange is bad administration or bad internal policies. Surely he will recognise, as the Brandt commission and the World Bank have done, that it is basically oil price increases and the weakness of the commodity markets over the decades that is responsible. In real terms commodity prices have gone down and oil prices have increased. That has been a major reason for the deficits. There may have been other minor reasons, but I hope that the hon. Gentleman will put the matter in perspective.

Mr. Wells: I shall not put all the countries of Africa, or anywhere else in the Third world, into one great lump, because there are major differences between them and it would be wrong to give a generic reply to the hon. Gentleman. The poorest countries are afflicted by all the problems enunciated by the hon. Gentleman. All suffer to a greater or lesser extent. I concede that this is not the only, or possibly even the major, problem that creates foreign exchange difficulties. However, the host Governments of many countries have played a significant part in the creation of foreign exchange problems. They are showing no ability and no political will to change that situation. They are relying on large imports of foreign aid and assistance, thereby avoiding the necessary domestic reforms that they need to increase food production and decrease their reliance on foreign exchange imports.
Tanzania is a case at which we must look extremely closely. There is no doubt that Tanzania can increase its food production if it changes its internal priorities. Fuel accounts for only 17 per cent. of Tanzania's imports, because it is not a highly industrialised country and does not rely heavily on oil imports. In that case, fuel is not a major factor in the foreign exchange problem.
The hon. Member for Queen's Park referred to disbursements, and I agree that the African development fund does not have a good record in this regard. That must have something to do, first, with the administration of the fund and the people doing it and, secondly, with the host Government's ability to absorb money that is allocated to them. That problem exists in respect of all development banks such as the African Development Bank.
The United Kingdom has only one representative on the African development fund, and we control only 2·46 per cent. of the voting power. Therefore, we are not particularly influential. However, it is important that the United Kingdom representative makes certain that the management of the fund and the tailoring of the projects to the needs of the country to enable it to disburse the funds


quickly to begin work in the field, are carefully monitored. It is important that those responsible for the fund be encouraged to do so.
I pay tribute to the formation of the organisation known as Shelter Afrique. Housing in Africa does not attract much support from international agencies. In fact, many countries have strongly criticised housing as a net diseconomy. Yet housing is a real social and health need, especially in the towns. However much we regret the rush to the towns in Africa, it is happening and to ignore it would be absurd. We must provide something for the future, however inadequate.
I pay tribute to the hidden influence of many European development agencies in helping to develop Shelter Afrique, which is a major step towards better African housing, especially in the urban areas that are developing rapidly into the most appalling health hazards and slums. It is a tremendous step forward for which I hope British funds will be used.
The order demonstrates the compassion of the British Government and people towards Africa. It is a gesture of faith in the African people that they can manage their affairs and direct funds to the matters that they believe are the most important. I urge the House to welcome this move with open arms, but I ask that the African nations try to improve the way in which they disburse and administer the funds available so that they benefit the poorest in the countries that we are trying to help.

Mr. Eric Deakins: Unlike my hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) and the hon. Member for Hertford and Stevenage (Mr. Wells), I intend to concentrate on one aspect of the activities of the African development fund—what it is doing, if anything, about population policy on the African continent and family planning.
The facts are fairly straightforward. The population of the continent of Africa is growing by 2·9 per cent. a year. The world's population is growing at only 1·7 per cent. a year, so Africa's population is growing 70 per cent. faster than the world's population. Africans have a high fertility rate, and the increase in population is based on the fact that the average African woman has 6·5 children. Forty-five per cent. of its population is aged under 15, which has many implications for the future. The population of the continent in 1950 was 220 million. By 1975, it had almost doubled to 400 million and, on present population projections, by the year 2000 the population will be 850 million. If those trends continue, by the year 2025—which is only 43 years away—its population will be 1·5 billion.
Those are stark facts and the African development fund is well placed to do something about them. If it cannot reverse the trends, it must at least try to slow them down. We cannot rely on famine or the Malthusian trilogy to defeat the population problem.
The position varies enormously in different countries. Kenya, which many hon. Members know well, has the highest population increase in the world at 3·9 per cent. a year, and 25 per cent. of the population is aged under 5. Such growth rate means that the population of Kenya and other African countries will double within 17 to 20 years. That has many implications for resources.
So much that we are trying to do to help people in the Third world, especially in Africa, depends on adequate population policies in the countries concerned. Although

we cannot always take direct action, because we do not have an aid programme for each country, we can work through institutions such as the African development fund and the African Development Bank.
Population increases such as I have described are the highest in the world and they automatically impose great strains on food and water supplies, agricultural land and social and education services. Kenya spends about 25 per cent. of its budget on education, but that does not guarantee every child a secondary education. That percentage will grow during the next decade, and that worries the Kenya Government.
There will be problems of food production in relation to the rising population. One of the messages that we have to convey to the African people and their Governments, through organisations like the African development fund, is that people from other countries might increasingly resent having to provide more and more aid merely to stave off disaster and ensure that present living standards are maintained for a rapidly increasing population. If we were to double our aid—as suggested by the Brandt report and many others, and as the Government are not doing—it would be eaten up by the demands of the rising population of those countries.
Population is a serious problem in all Third world countries, but Africa probably has the greatest problem. All those problems can be resolved by development in the broadest sense. That is why we particiate in the African development fund. However, the world cannot wait for prosperity to reduce the birth rate in African or other Third world countries. There must be direct action with regard to population and family planning in all those countries. The African countries are belatedly waking up to the problem which confronts them and which will become increasing serious, if not disastrous, by the end of the century.
African politicians and Governments who were previously hostile to a population policy and birth control for religious, cultural, social or other reasons are becoming more receptive to the need for such policies. I hope that we shall eventually have a director and executives involved with the fund so that we can exert more influence to ensure that the fund spends an increasing proportion of available resources on population policies and family planning supplies and facilities.
Money needs to be spent on education, and provision needs to be made for mother and child care facilities in rural areas. That is a problem in many parts of the world. All those matters must be subsumed under the general heading of development in favour of population policies and birth control to ensure that the problem does not become worse. Those problems are increasingly because we cannot provide enough money to deal with them adequately. We shall probably never succeed unless we can call a halt to the population explosion in African and many other countries.
My last point relates to the fact that the fund will need extra resources. The Minister has said that we are providing money at the moment. I hope that eventually, under this Government or another Government who are more favourably disposed to developing countries, more money will be paid into the African development fund
I also hope that even at present levels of British assistance, and that of our bilateral aids as well, the Minister and his officials will insist, as we are entitled to, that some part of the money, and not just a small


percentage, goes into the population component of development policies fostered by the African development fund. The fund, moreover, in the advice that it gives to Governments in Africa, should insist, and I think that the Governments will be receptive to this concept, that there is a population component in their national development plans.
There are far too many countries in Africa, and in many parts of the Third world, that still tend to dismiss the population component in development planning and plan airily without any idea of the effect of the expansion of their population at the rate of 2 per cent., 3 per cent., or 4 per cent. a year. As we all know, if one cannot plan on

a statistically sound basis then the plans will come unstuck. That is what many development plans in that part of the world are likely to do unless they include, at the most basic level, a population component.
The population aspect should be included in every part of the development plans. I make this plea to the Minister because this is one question on which we can help the African countries without necessarily having to supply more money to them. He will find that they are receptive. It is best that it should be done through something like a regional development fund, such as the African development fund; and I hope that when we have our own director on the fund, and have a bigger say in the fund's activities, this will be one of the dominant themes that we shall be advancing.

Orders of the Day — African Development Fund

Mr. Christopher Brocklebank-Fowler: I welcome the introduction of this order by the Government as being a further demonstration of this country's commitment to assisting the developing countries in Africa with concessional finance. However, I feel that this method of discussing this expenditure of public money is unsatisfactory.
This is the third debate that we have had on the replenishment of the African development fund. What is interesting, if one looks back at previous debates, is the different systems by which the House choose to look at this problem. The debate on the first replenishment took place on 26 July 1977. There was a general debate for one hour on the Floor of the House during which, I regret to say, hon. Members who contributed—there were not many of them—did so on general aspects of aid policy. To an extent, that is understandable, but it shows a lack of capacity by the House to get down to the nitty-gritty of what is a serious attempt by successive Governments to transfer funds to the developing countries. The House does not give itself the opportunity to come to grips with the real technical problems of making disbursements from funds of this kind.
On 25 July 1979, when we had the second debate on the fund, and the second replenishment, it was grouped together with three other replenishments for three other regional development funds and taken in a Statutory Instruments Committee. The combined speeches of everyone on the Committee lasted less than one hour, considering disbursements to four important funds and major tranches of public money.
Tonight we are considering, at the Minister's request, a proposal to transfer a further £24 million to the African development fund for the purposes for which it was set up. I counsel the Minister, my hon. Friends and hon. Gentlemen in all parts of the House who serve on the Overseas Development Sub-Committee to make a rule of bringing these matters before that Select Committee before the replenishment order comes before the House. The House would benefit from a regular perusal of the progress that is being made in these regional development banks, so that much more technical information could be available to those of us who do not serve on that Committee when the House debates these matters.
In the few moments that I have at my disposal, I want to press the Minister on the subject of mathematics. In 1977, Mr. John Tomlinson, who was a member of the Labour Government at that time, introduced the debate on the first replenishemt. He told us that at that stage we had spent £2 million. He said that he planned to spend a further £2 million as a payment to the capital stock, and an additional £8 million to the capital stock for the fund's second operating period of three years, beginning on 1 January 1976. According to my mathematics, the House was being asked on that occasion for authority to spend £10 million. Presumably, at the end of the debate, without a Division, that authority lay with the Government of the day.
When the House returned to the subject in the Statutory Instrument Committee upstairs on the occasion of the

second replenishment, on 25 July 1979, we were told by the Minister that the United Kingdom had contributed a total of £12·4 million to the African development fund. On that occasion, he said that we were corrunitted to contributing £18·5 million. Now, £18·5 million, and the £12·4 million that we were alleged to have spent, add up to the £31 million which the right hon. Gentleman's Department's press release of 14 June this year announced was our commitment to date. It went on to say that £7·8 million of that amount had been spent already. If one takes £7·8 million from £31 million, one ends up with precisely the sum that the right hon. Gentleman is now asking the House for further authority to spend. What is the basis for that further request—or is my mathematics all that bad?
There have been three major debates—major, in terms of overseas development being discussed in the House at all—and commitments of £31 million have been made. Only £7·1 million has been spent. We are entitled to know why the flow of funds has been so slow.
I was delighted to hear the Minister say that he proposed to introduce a further order in the autumn authorising the United Kingdom to become a non-regional shareholder in the African Development Bank. I assume that that means that he, as a governor of the fund, and the senior member of his Department who is an alternate governor of the fund with him, will become governor and alternate governor of the bank. By taking a more active part in the bank, will he be in a position to accelerate the rate of disbursement of funds? We shall look to him to achieve that.
There remain only two further questions for me to ask. First, will the cost of becoming a director of the bank be the £63 million that the Minister told the House a year ago that it would cost? His intention then, if I recall it correctly, was to pay £15 million down and four equal instalments of the balance over a total period of five years. The House would like to know the updated figures, and the extent to which the House would be invited to commit itself to a substantially larger sum.
At that time the House will want to hear from the Minister positive proposals on how he believes the disbursements can be accelerated. The problem lies mainly in identifying projects that are suitable for the type of soft loans on which the various development banks lend. One of the areas in which recipient countries are least able to cope is in establishing what are viable projects, who are reliable entrepreneurs to whom to lend money, what type of technical assistance they require and what type of management back-up they require. I agree with the hon. Member for Glasgow, Queen's Park (Mr. McElhone) that in this connection, although it is peripheral to the debate, a decision on educating the most able people from the poorest countries is vitally important. If one adds to the identification of projects the absence of technical expertise and management skills, there is immediately a constraint on lending.
Secondly, I invite the Minister to consider seriously how we can encourage new private investment from Britain and Europe in developing countries which, in association with loans available through the regional development banks, could begin to expand rapidly the small business element of the developing countries. The Minister will agree that there is a shortage of entrepreneurial skills at the very lowest level in the poorest countries. It is impossible, however able the planning committees and the departments of their Governments are, to plan down to the grass roots. What is needed is


encouragement to local entrepreneurs on a small scale to start building up businesses that can provide local employment and cash to people who are otherwise locked into subsistence farming to their detriment and to the detriment of food production in the countries concerned.
Are there not some imaginative proposals for encouraging private investment flows, the transfer of management technology and technical assistance and the education of the right cadres of people to operate at the grass roots in the developing countries to ensure that the development banks are able substantially to increase the disbursement of their funds? It is, if I may make a rather cheap remark for me, very easy for a Government to come to the House and ask for a pledge for a large sum of money. The Government of the day feel good about it and we all believe that we are doing the right thing, but the real test is whether that money is being disbursed to the grass roots and is playing the part that it should be playing in developing an infrastructure for local economies at the lowest level in the recipient countries.

Mr. James Lamond: I was relieved when I heard my hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) announce at the beginning of his speech that he did not intend to divide the House on this order—nor, I presume, on the order that is to follow—because, although I have my criticisms of the order, I should not wish to vote against it.
I found the contribution of my hon. Friend the Member for Waltham Forest (Mr. Deakins) extremely interesting and informative. With an inspiring array of statistics he was able to demonstrate his theory about the need for population control in Africa, and he also mentioned other parts of the world. Most of us agree with my hon. Friend, but he said that some African leaders still had reservations on the subject. That is true, and there is another side to the argument. It is arrogant for us in the West, with all our wealth and in the light of all the resources that we consume, to say to the poor three-quarters of the world "You must control your population so that we can conserve our resources."
Sheikh Mujibur Rahman of Bangladesh, one of the great leaders of the East, who was murdered by the CIA because of his progressive views, once told me that all that his people had in the world was the pleasure of their families about them and the consolation that there would be someone to look after them when they grew old. The West was asking them to deny themselves even that small pleasure, while Western nations were thrusting ahead with their ever-growing consumption of the world's resources.
I do not accuse my hon. Friend the Member for Waltham Forest of being arrogant, but it is arrogant of the West to make such demands.

Mr. Deakins: I was speaking only about developing countries. There is another speech that I could have made, though it would not have been appropriate on the order, about the need for population policies in countries such as Britain. I am joint honorary secretary of the population and development group in the House which has been trying to press the Government and the Prime Minister to ensure a proper population policy for Britain as one of the richest

countries in the world. One child in Britain will consume during its life about 30 times as much of the world's resources as the average African child.

Mr. Lamond: That was a timely intervention, and I am glad that my hon. Friend has had the opportunity to clarify his position. I know his views and that is why I said that I would not describe him as arrogant.
We were pleased with the appointment of the right hon. Member for Banbury (Mr. Marten) to his present post, because we knew that he would bring to that position the compassion that we had observed in him when he was a Back Bencher. I have seen him at his office and tried to persuade him to give extra aid to some countries. He has been receptive to those pleas but not often able to respond to them. He has said that the total allocation had been reached and that although there were many outstanding and deserving demands, we were spending as much as we could. He meant that we were spending as much as there was the political will to spend; we are certainly not spending as much as we could.
I was pleased to see you take over the Chair, Mr. Deputy Speaker, because your immediate predecessor had the misfortune to be in the Chair when I spoke in Thursday's debate on the defence Estimates. I am about to repeat some of what I said in that debate and I should not have wanted your predecessor to have to listen to it again.

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. Will the hon. Gentleman's remarks be relevant to this debate?

Mr. Lamond: Obviously they were relevant to the previous debate and I am sure that if I am out of order you will draw my attention to that fact.

Mr. Deputy Speaker: Order. Perhaps I should have said that I hope the hon. Gentleman's remarks will be relevant to this debate.

Mr. Lamond: So do I.
Last Thursday we were also discussing Government expenditure. Many hon. Members spoke then, and almost all of them called for more expenditure on defence. I pointed out the disparity between what we spent on arms and on overseas aid, which includes the money that is contributed to the African development fund.
The order will replenish the fund to the extent of just over £24 million, and the next order provides for a sum approaching £13 million. That makes a total of about £37 million. I am well aware that that is not the total amount of our overseas aid. Nevertheless, if we look at page 9 of the "Statement on the Defence Estimates 1982" we see that the figure that we are discussing tonight—with which we hope to bring to fruition many of the hopes of African people and subsequently those of people throughout the world—almost coincides with the cost of one Hunt class mine countermeasures vessel—£35 million.
That we are planning to spend £14,000 million and more on defence next year is made worse by the fact that the sudden crisis of the Falklands was solved by the expenditure—quite apart from the dreadful loss of life on both sides, which I deplored—of about £1,000 million from the Contingency Fund.
The Contingency Fund stands at well over £2,000 million, so we are assured that no harm will come to us if it is raided to the extent of £1,000 million. However, that


contrasts with the Minister's response to my approach and that of others on matters relating to the African development fund. I do not blame him. I know that he does his best to provide as much money as he can, but he is in a straitjacket created by the Government's monetary policies. He told me that not another penny could be found anywhere. I think that I was trying to get some assistance for Vietnam on that occasion, although I know that that does not come under this order.
A country that is eligible for aid from this fund is Ethiopia. I have visited Ethiopia and had the opportunity to see a co-operative farm, several of which have been set up under the new Ethiopian regime. It was very interesting. They were trying to discover new cash crops, and so on. My hon. Friend the Member for Waltham Forest suggested that one of the best ways to assist these people would be to guarantee a reasonable price for their crops and not leave them to the wide market fluctuations. Most of the time prices seem to go down.
The farmers in Ethiopia are happy with the new regime and the opportunity that they have to try to develop agriculture for their own benefit. They took me to see what they regarded as their proudest possession—an electric water pump. I am sorry to say that it had been manufactured in Germany. I should have preferred to see one manufactured in the United Kingdom. After much debate and thought they had decided to buy the pump. They told me that it would remove 25 per cent. from their total income from the co-operative farm for the next five years. That is what they had to balance. That was the sacrifice that they had to make to get the pump to assist their agriculture and irrigation. However, they had done it and they were proud to have done so.
Those farmers felt proud, but I felt humble. The cost of the pump was about the same as the cost of a fuse for a bomb. The cost of a fuse was not mentioned in this year's defence Estimates, but it was mentioned last year. I noted the cost especially, because the fuse was manufactured in my constituency. Of course, I have told the workers that I do not support that sort of manufacture. I should like to see my constituents manufacturing pumps that could be provided for farms in Ethiopia under the scheme. I know that we do not deal with the fund direct, but it is the sort of equipment that we hope is bought to assist developing countries in Africa, such as Ethiopia.
Another example in Ethiopia was a large children's farm that had been set up to assist the orphans of a number of wars. There were many thousands of orphans with nowhere to go and no one to look after them. Sweden had provided $25 million to set up the school farm, where children are educated until the age of 16 years. At the same time, they are taught to look after animals on the farm. The scheme seemed to be working extremely well. There are criticisms of it, as there are of everything, but the general principle seemed to be excellent.
Last night Conservative Members were saying that they felt that the esteem in which the United Kingdom is held abroad has increased markedly since our great victory in the Falklands. I do not take that view. I think that our esteem rises in the world if we show compassion and the desire to assist those who are on the verge of starvation, who are illiterate and who need medical help. A far better way of spending the £14,000 million that we spend annually on arms—I accept that some must remain to be spent on defence—would be to spend part of it on projects such as the school farm that is financed by Sweden. This

would assist those in African countries to remember what we have done to help them. They would remember it for the rest of their lives. That is the esteem in which I should like to see British people held throughout the world.

Mr. William Hamilton: On 11 February 1982 I intervened in one of these rare aid debates to refer to the problems of blindness in the Third world. I shall refer especially to that problem in Africa to ensure that I keep in order if nothing else. It is an accepted fact that there are about 40 million blind people in the world and that malnutrition destroys the sight of a quarter of a million children every year. A fair proportion of the children are in Africa. It is accepted that by determined action the problem could be controlled internationally in 10 years.
The 1979–80 annual report of the Royal Commonwealth Society for the Blind contains a telling report of a speech by Sir John Wilson, the RCSB director.
He said of the effort made to solve the problem:
This work could be justified economically: the modern world spends billions on preventable blindness. It could be justified politically; amongst human rights must surely be the right to see. But, what we really appeal to is not profit, philosophical right, or even the fulfilment of a realisable scientific goal, but the sense of value built into our contemporary civilisation.
Such debates attract me if only because all hon. Members who take part are genuinely concerned about Third world problems. The Prime Minister would not feel at home. She regards such help as a hand-out. She believes that people should fend for themselves. That is the Minister's problem. His heart is in the right place, but his bottom is in the wrong place. He is on the Front Bench and he must do as he is told by his masters and mistresses. When he comes here he speaks with a forked tongue. That is the nature of his job.
In an earlier debate on blindness the Minister in his glib way said that the Government were helping. He generalised. I followed the debate up with a question. The Minister had explained the technical aid and advice that we were giving. I asked him:
if, further to his reply to the hon. Member for Fife, Central on 11 February … he will list the countries to which the United Kingdom provides ophthalmologists and equipment under the technical co-operation programme; and what is the estimated annual cost of such assistance.
From what the Minister said when winding up the earlier debate, I thought that we were spending millions of pounds, if not tens of millions. We should consider the Minister's reply in the context of what has been said about missiles. I carry the "blue book" with me for such debates as this. The Minister said:
Including the provision of experts, equipment and training, we are currently helping in the Gambia, Sierra Leone, Uganda, Zambia"—
All of which are in Africa—
St. Helena and Costa Rica, and have recently done so in Honduras, Jamaica and India.
That is nine countries, four of which are in Africa and two others near enough. The Minister went on:
The total value of our aid to combat blindness is of the order of £475,000 a year."—[Official Report, 1 March 1982, Vol. 19, c. 17.]
That is a disgrace. It is indefensible.
The cost of 68 Milan anti-tank missiles at £7,000 a piece would add up to the total aid that we are giving to cure blindness in the nine countries. The same sum would


buy 68 Milan anti-tank missiles or eight anti-RADAR shaft dispensers for Harrier aircraft, which cost £55,000 each. Politics in general is about priorities. If one spends a given amount of money on defence, one can spend that much less on curing blindness in the Commmonwealth and elsewhere.
Hon. Members of all opposition parties are united in their condemnation of the Tory Government's approach to the aid programme. World peace is more endangered by world poverty than by the proliferation of nuclear weapons. It is on that basis that we regard the Government's policies on these matters as indefensible. They are inadequate for the challenge that faces us.

Mr. Neil Marten: The debate qualifies for the traditional description of wide-ranging. It frequently ranged outside the subject intended for discussion—the order. I have about a quarter of an hour to answer some of the points that have been raised.
The hon. Member for Glasgow, Queen's Park (Mr. McElhone) referred to students' fees. That subject is outside the range of the order. As I said the last time that I answered questions, we received the Overseas Students' Trust report and we are now working on it. When interdepartmental discussions have been held, we will go further than my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs did in a written answer when the report was published in May.
The hon. Member for Queen's Park asked why so little is spent on health and education. Before anything else, it is important to give people a means of living and feeding themselves. We and other donors agree with the fund management that agriculture in all its forms should be the top priority. Because of the problems that were mentioned at the Nairobi conference to which the hon. Gentleman referred, agriculture and food have top priority, not merely with the fund but also with other bodies such as the World Bank. The fund must also follow the priorities of member Governments as we do in bilateral aid giving. Health education received 15 per cent. of loans in 1981 as compared with 10 per cent. in 1980. The trend is up, if one can judge a trend over two years. I hope that it will continue.
The hon. Member for Queen's Park also mentioned land reform. That is a matter for individual African States. Most of the fund aid to agriculture goes to integrated rural development and similar schemes that primarily benefit the peasant communities. He then mentioned Zimbabwe which we have often discussed at Question Time.
We have said consistently that although we have allocated £30 million out of our independence settlement with Zimbabwe—it is a lot of money—much of it has not yet been used.
When I saw Dr. Chidzero, the Minister for Development, on his recent visit here, we had a long discussion about the matter. He is trying to initiate a new plan not only for land resettlement, but also for infrastructure on a village community basis, such as schools, water and electricity, which I am sure is the right approach. We want to get other countries to join in allocating funds for this. So far, Zimbabwe has not been very successful in getting other countries to contribute to the fund. Some people say that there has been a hold-up

due to our administrative arrangements. That is not so, but we are looking at this with the Zimbabwe Government and if there is any way in which they think that we are holding things up we shall try to rectify it.
The hon. Gentleman mentioned transport and specifically vehicles. I think that when the fund refers to transport in its report it is more in terms of upgrading rural roads and maintaining a basic road network. The more I see of developing countries, the more I realise the importance of those aspects so that farmers can get their produce to markets and so on. That is where the money goes, on transport rather than on vehicles, however good they might be.
My hon. Friend the Member for Hertford and Stevenage (Mr. Wells) said that it was entirely up to the Africans to say how the fund's money is spent. The position appears to be that the fund has agreed sectoral priorities and it is up to its management to ensure that projects are sound. We and other donors can influence policies and individual decisions through our directors on the executive board. At present, with Yugoslavia, we are represented by the United States, but we provide the alternate director.
My hon. Friend also referred in his excellent speech to housing and the Shelter Afrique. That was launched at this year's annual meeting of the African Development Bank, but it is largely a creation of the African States themselves and non-regional countries such as our own have not really been involved in it.
The hon. Member for Waltham Forest (Mr. Deakins) dealt with his well-known subject, on which I very much share his views. I think that we shall now be in a stronger position to influence expenditure from the bank and the fund and I will draw the attention of those responsible to his comments. I entirely agree that this is a tricky subject to deal with for a variety of reasons of which the hon. Gentleman is well aware. I assure him that my heart is certainly in it because the problems that he raised are so obvious.
The hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) made an interesting point about not having really had the opportunity to debate these matters. He suggested going to the Overseas Development Sub-Committee of the Select Committee on Foreign Affairs to extract the information on the kind of questions that have been put today. We might then debate that report with the order or other measure before the House. I think that that is a good idea and I will draw it to the attention of my right hon. Friend the Leader of the House.
Mathematics is not my strong point at the Dispatch Box, but perhaps I may write to the hon. Gentleman on some of his questions. He asked what was the basis for the £24 million that we are now pledging as against the £31 million already provided. I am advised that the £31 million has been used to cover commitments so far and that the £24·7 million will cover new commitments for 1982–84. If we withheld this, the fund would have to cut down its lending to new projects and we have continually stressed the need to improve project implementation and monitoring.

Mr. Brocklebank-Fowler: Can the Minister confirm that the money that has been committed has been drawn down in the form of promissory notes but not disbursed?

Mr. Marten: I shall have to look at that. I should not like to answer that question off the cuff.
We have had an interesting debate on aid. Many useful points have been made. I was fascinated by them. The debate shows the interest that the House takes in the subject and in the problems of Africa. I stress that there has been no questioning of the draft order itself. On the contrary, our intended contribution to the African development fund has received wide, even unanimous, support. I am sure that that message will not go unnoticed by our friends in Africa and that they will draw encouragement from it.
I commend the order to the House.

Question put and agreed to.

Resolved,
That the draft African Development Fund (Third Replenishment) Order 1982, which was laid before this House on 21st June, be approved.

Orders of the Day — International Fund for Agricultural Development

The Minister for Overseas Development (Mr. Neil Marten): I beg to move,
That the draft International Fund for Agricultural Development (First Replenishment) Order 1982, which was laid before this House on 21st June, be approved.
This order seeks the approval of the House for an increase in our payments to the fund. The United Kingdom has voted in favour of the proposed contributions, at a meeting of the fund's governing council, subject to the approval of Parliament.
The international fund for agricultural development—I shall refer to it as IFAD—is a specialised agency of the United Nations, born out of a resolution of the world food conference in 1974. It is aimed specifically at strengthening agricultural production in developing countries. It is, by definition, focused on the rural sector where so much of the world's poverty lies. We were a founder member of the fund and we approve of its aims and its policies.
As in the case of other multilateral aid institutions, our contribution helps to generate a substantial flow of resources to countries in need. In IFAD's case, 16 Commonwealth countries had received loans by the end of 1981.
IFAD is an unique institution. Its 136 members are divided into three categories, each with equal voting power. Category I covers the OECD member countries, category II the OPEC member countries and category III the non-oil developing countries, which are the only members eligible for assistance from the fund. This partnership has not been without its problems—I shall mention this in a moment—but with fairly modest administrative and financial resources the fund has already tried to put its special stamp on many rural projects.
IFAD began its operations in 1977 with initial resources of $1,024 million, made up of contributions from category I of $569·5 million, category II, $435·5 million and category III, $19 million. The rather peculiar balance between OECD and. OPEC contributions reflected an ad hoc compromise between their differing views. All this has now been committed, although by 31 December 1981 only $110 million had been spent.
A ratio of disbursements to commitments of just under 11 per cent. may seem on the low side, but IFAD is a young institution and deals only with agricultural projects on which the rate of disbursement is normally quite low in the early years of each project. We expect spending to rise steadily as more of the projects mature.
Negotiations for the first replenishment of the fund's resources to cover the commitment period 1981 to 1983 started in 1980. They were rather drawn out because, as with the original endowment, OPEC and OECD members had different ideas about the right balance between their relative contributions. Western traditional donors have always seen IFAD as an institution in which there should be equal partnership, equal votes, and equal contributions, but OPEC donors did not wish their contributions to be more than two-thirds of that put up by the OECD countries.
Eventually a compromise was reached, itself not far from the original compromise. At the fund's fifth


governing council in January 1982, category I and II members agreed to provide $1,070 million to cover commitments up until about the end of 1983. Category I members will contribute $620 million, which includes some special supplementary contributions pledged to help the negotiations reach finality. Category II will put up $450 million, which includes $430 million from individual members and a further contribution of $20 million from the OPEC special fund. It is expected that category III countries will contribute in addition about $31 million, but this figure is subject to confirmation.
The OECD contributions collectively will go up by 8·8 per cent., and those of OPEC collectively by 3·4 per cent. Together with the $240 million carried over from the initial endowment, the fund will thus be able to sustain a lending programme for the three years 1981 to 1983 of some $1,300 million.
Our own share, subject to parliamentary approval, will be £12,901,127. That is equivalent to $29·75 million at the exchange rate agreed for the replenishment, or 5 per cent. of the basic category I contribution of $595 million, and 4·8 per cent. of the final category I total. Our participation in category I's share of the replenishment at this rate was accepted by other donors. I apologise for all these figures. I know that they are difficult to follow, but they must be put on the record.

Mr. Frank Hooley: I understood the Minister to say that £12·9 million was equivalent to $29 million. That cannot possibly be correct at the present rate of exchange. How is that dollar rate calculated?

Mr. Marten: I said that our own share, subject to parliamentary approval, will be £12,901,127. That is equivalent to $29·75 million at the exchange rate agreed for the replenishment.

Mr. Hooley: Ah!

Mr. Marten: That is how it works. In accordance with the agreed resolution covering the replenishment, our contribution will require to be paid in one, two or three instalments in such a manner that the last instalment is paid within the current replenishment period—in other words, before the end of 1983.
Our payments will be in the form of the deposit of non-interest bearing notes encashable on demand. We plan to deposit the first of these as soon as possible after this order is made. We expect all these notes to be encashed over several years. Again, I should emphasise that it is only at the encashment stage that there is an actual call for funds on the aid Vote. The replenishment arrangement provides that, if one or more donors fail to meet their obligations promptly and in full, other countries' contributions may also be rephased.
The draft statutory order entitled "The International Fund for Agricultural Development (First Replenishment)" authorises the Secretary of State to pay the United Kingdom contribution to the replenishment. I commend it to the House with confidence that hon. Members will wish to see our support for IFAD continue, and that that support will be translated by the fund into well-targeted food production projects in some of the world's most deprived countries.

Mr. Frank McElhone: In endorsing the order, I wish to put several questions to the Minister. The Labour Government's initial contribution to the fund in July 1977 was £18 million. The present sum is £12,900,000. At May 1982 prices, if the Government were to make the contribution that was made by the Labour Government, the Minister should have said £31·5 million. The present sum is low and cannot cover IFAD, which provides agricultural development to almost the entire world. I checked the Minister's figures with the statistician in the Library and was assured that they are accurate.
Is this paltry sum due to the fact that part of the PESC allocations to the Minister's Department are being transferred to the Foreign Office or Ministry of Defence budgets? I hope that the Minister will give a firm and positive answer because I should hate to believe that the starving poor of the Third world must pay for the Prime Minister's adventure in the Falkland Islands. [Interruption.] I understand the difficulties of conferring with the Whips at this late hour, but I hope that the Minister understood what I said. Has the PESC allocation to his Department been transferred to the Foreign Office or the Ministry of Defence? I repeat that because of the intervention of the Whip.
I return to the question that I raised during our debate on the African development fund about the tragic underspending of aid funds. As I said to the hon. Member for Hertford and Stevenage (Mr. Wells), the order—like the previous order—does not cover students' fees. However, I must repeat that if one disburses money in African or other poor countries, one must place trained people in those countries. They must be trained in Britain in order to ensure that the money that we allocate under this and other funds is spent as speedily as possible.
The Food and Agricultural Organisation of the United Nations stated:
The world's cereal reserves fell seriously below danger level last year.… Stocks fell from 274 million tons—19 per cent. of annual consumption—in 1979, to only 210 million tons—14 per cent. of consumption—in 1981.
I warn the Minister that the report goes on to say:
This is not far above the low of 12 per cent. recorded in the 'world food crisis' of 1973–74 and way below the 18 per cent. which the FAO recommends as a minimum safety level.
We cannot be complacent, because the poorest countries cannot produce the food to feed themselves. Unless we train skilled personnel and encourage students to come to Britain, our efforts to disburse money may be a waste of time. The FAO report "Agriculture Towards 2000" shows that between now and the end of this decade there will be another 155 million people who will be acutely undernourished. Those are frightening figures taken with the 800 million people to whom we have already referred.
In spite of criticisms levelled against it, IFAD has a great deal to boast about. The Brandt commission described it as a model for the future, and I pay tribute to its system of power sharing. The voting is balanced equally, with one-third being controlled by OPEC, who are donors to the fund, and one-third by OECD countries who are the other contributors. The fund is unique because a one-third control is held by the recipients. For many years we have asked for something similar for the World Bank. The World Bank is controlled by the United States of America. Those countries which do not suit the United


States of America—Nicaragua for example—do not benefit from the World Bank. We should pay a tribute to the democratic balance in that fund. It is something we should like to see in the other aid and development funds that proliferate throughout the world.
The fund deserves credit for giving the first international loan to Cuba since the revolution. It is important that countries such as Cuba and Nicaragua should receive loans. I have constantly raised that point with the Minister. The £20,000 that the Government have offered Nicaragua through the Red Cross for the serious flooding there is a disgrace. That should be rejected by a Minister who we have said has some compassion in his make-up. Perhaps it does not surface when he is at the Dispatch Box.
The Government and the United States Government do not want countries such as Cuba and Nicaragua—which fought against the cruel dictatorships of Batista and Somoza—to go to Russia and other Eastern countries for their aid. With their problems of illiteracy and poor agriculture they need funds. Great Britain and the United States of America rejected requests for aid from Cuba and Nicaragua, which left them only one place to go. The Nicaraguan Foreign Minister came here some months ago and then had to go to Russia.
There is a great deal of disagreement within the Minister's Department because he is making serious cuts in the numbers of skilled staff who can give advice on agricultural projects. One department has been cut by 60 per cent., according to a report in The Observer a few weeks ago. If the Minister is cutting his Department as a result of the Rayner proposals I hope that he will think again.
It is nonsense for the Minister to ask the House to endorse a proposal to give £12 million to the fund because the fund has over $1,000 million, yet only $110 million was spent during 1981. The Minister should think seriously about his Department.
The Minister was in the Caribbean last month. Is the fund giving any assistance to Grenada which is under immense pressure from the United States of America because it is building an airport which the United States Government think poses a threat to their security? I think that is nonsense.
What help is being given to the smaller islands in the Caribbean, so that they can diversify their crops? I understand from a speech that the Minister made last month there that he will have to cut the allocations to the Caribbean in comparison with the previous year. If that is so, it makes a bleak picture for those small islands. For example, in Haiti, three-quarters of the people are living on an income of £70 a year.
With a cut in the aid programme of 11 per cent. in real terms this year, I find it somewhat hypocritical that the Prime Minister could say on World Food Day in October last year:
All of us, as human beings, must feel compassion with those in need, and determination to help eliminate suffering and degradation … Hunger and malnutrition are major problems. Everyone should be concerned about them".
We know only too well from the right hon. Lady's answers at Question Time and her negative responses at the summits at Cancun, Versailles and Ottawa, that she is making no response. I hope that the Minister will give a more positive response when he winds up tonight.

Mr. Michael Welsh: I should like to emphasise a point that has already been made, that £18 million was paid by this order last year, but only £13 million this year. I appreciate the tremendous amount of trouble that has been taken and the discussions that have been going on in Rome over this issue and it appears that we are paying a percentage, which means in real terms a decrease in aid to the International Fund for Agricultural Development.
What detail was gone into in the discussion on this replenishment with the United States? With the democratic system for distributing the aid, I appreciate that the United States, to say the least, is fighting shy. It may be because of this that the reduction in real terms has come about. This is a great pity, because of all the methods of distributing aid I can see, by reading articles about the fund, that it is one of the good methods.
This order is similar to the previous order that we have discussed tonight, which dealt with the African Development Bank, African States and the African development fund, which helps the States. The policy of the previous order is geared to the conquest of hunger, poverty and disease. This order helps agriculture and, particularly, food production. The two orders are therefore similar, but different, methods of distribution.
I wonder whether the Minister and other hon. Members realise—as I am sure that they do—that in 1974 it was discovered that there were some 500 million malnourished people living in rural areas of the Third world. That is still with us. This may be due to large and rising populations, but it is still there. On top of that, we have been let down by the international financial community. At least $30 billion is needed each year for agricultural investment in these areas. Last year, in real terms, there was only $5 billion, which was a terrific shortfall on investment to provide food for the needy.
With the World Bank "de-emphasising" poverty as a criterion for its loans, other aid reeling from cuts, and Western aid being pruned, it is to this IFAD aid that the poor in the rural areas of the Third world are looking. As a result of all the cuts that are being made, it is inevitable that the poor in the rural areas will look to this sort of aid. I therefore welcome it, although I wish that it had been a lot more. I am sure that the Minister, too, would have liked it be more. It will help the needy in the Third world.
One wonders sometimes whether the aid reaches the poor. From the documents that I have read recently on this subject, it appears that much of the money is going to the vast pool of landless and rural poor in Asia, where it is being reasonably successful. There are 23,000 people in Bangladesh who are receiving aid of this description. Many of the people receiving aid are women who are working in rural areas. So the aid seems to be getting through to the places where we intend it to go.
This aid helps many other countries with loans to small farmers. It breaks clown certain obstacles which large aid projects cannot overcome, and it can get more directly to the places where it is needed. The aid seems to be reaching the poor.
What we do not want is criticism, and I am sure that no right hon. or hon. Member would criticise it. It needs a three years' run before a judgment can be made. Only


then shall we see whether it is reaching the places that it is intended to reach. So we should wait another three years before passing judgment.
One must accept that some funds are drying up. Iran, for example, gave $105 million to the fund. Now that the Ayatollah is in power, I am sorry to say that Iran has contributed only $19 million. That shortfall has to be made up from somewhere else, and I am glad to learn that other countries in the Middle East and other areas are making it up. Saudi Arabia, for example, has increased its aid tremendously to help to get over the shortfall from Iran.
There is much to be done for the poor rural areas, and I feel very deeply about this matter. I should like to know what is happening about the decade of water. By and large, that is what the order is about. Agriculture is about water. What is happening to the decade of water, and are the Government giving any more help in that regard? If, through this order, money is being invested in water, and so on, in agricultural areas, when it could come direct from the decade of water, if we contributed to it, this small amount that we are contributing could help other projects in rural areas. It is a matter of vital importance. I should be very grateful if the Minister could explain what the Government are doing in connection with the decade of water, and what they expect to do to help our brothers and sisters who are unfortunate enough to live in areas of poverty. The decade of water is most important. If we can win on that, we will see a vast improvement.
Are we sending technical aid to these countries in addition to the aid set out in the order? It would be a great pity if rural areas had to pay for technical help. I do not say that that would be a waste of money, because it would be needed, but it would be a great deal better if the rural areas could receive direct technical aid from the Government to help investment and work in the rural areas. Two or three technical experts could bring a tremendous amount of help to those areas. Is the Minister saying that we are leaving it to independent water authorities to send their own technical men, and that the water rates will pay for it? Water is vitally important to the rural areas. If we choose to be narrow minded—there is nothing wrong with occasional narrowmindedness—we could send technical advisers to advise the people in the rural areas how to use to the best advantage good British hardware. There is nothing wrong with advisers going out there to use British hardware. It is not immoral if because of the loans we make we can in return provide jobs for our industry.
I turn now to the cuts in the numbers of overseas students. In Malaysia we have already lost about £4 billion of trade. The deputy Prime Minister, whom I met there, told me that, because of what we had done to their students, we would receive hardly any contracts. Those students will go somewhere and will receive aid from other countries. They will buy manufactured goods from the countries in which they were trained because they will already have been trained to use them. I say with great respect to the Minister that the changes in the fees for overseas students were not his fault. I accept that it was the fault of another Department. I have spoken to many people in different countries about this matter and it must be accepted that it was a dear mistake to lose hundreds of millions of pounds in contracts and the friendship of those countries in order to save a few hundred thousand pounds.

I am sure that the Department of Education and Science now accept that that was a mistake. Nevertheless, it has been done.

Mr. Richard Body: If the hon. Gentleman is of the opinion that we are losing out economically as a result of that decision, has he any evidence that other countries are seeking to offer the same type of facilities to overseas students in order to gain that advantage?

Mr. Welsh: Australia, New Zealand and Germany are doing so. The biggest shock was that Malaysia was thinking about sending its students to Russia where the fees are only a quarter as high as ours. Those students would be heavily subsidised. We should subsidise overseas students so that they can go back and help their poor countries to grow into an industrial country and a better country. If they can do that, the subsidy has been worth it; and if, having studied in Britain, they return home and order British goods, the subsidy has been worth it three fold. The Minister visits many of the countries affected and I am sure that he finds, as I did on my visit to Singapore and Malaysia, that our treatment of overseas students dominates all discussions.
The IFAD is a good way to help poor rural areas. The power-sharing in the fund is unique, and I hope that it continues. I am sure that the Americans, would like to change the system, because they make the biggest contribution to the fund, but I hope that, bearing in mind the good will generated by the fund and the fact that the working together ensures that money goes to the poorest, the Americans will accept the power-sharing. The results will be clearer after another three or four years, and I am sure that the fund will prove a success.
As changes occur we may be called upon to be more generous. As oil prices come down, some countries may not be able to contribute as much to the fund as they would wish and we, as one of the richer countries, may have to be more generous—not to a State or a piece of land, but to our less fortunate brothers and sisters. I hope that when the call for more money comes, the British Government of the day will answer that call.

Mr. Frank Hooley: Mention has been made of the tripartite structure of the fund, and we need to stress that the structure is tripartite not only in terms of finance but in terms of control. It is sad that the Communist bloc did not join and make it a quadrilateral structure, but perhaps that will come about one day.
I am not sure whether the structure is unique among United Nations organisations. The International Monetary Fund and the World Bank have weighted voting, but it is so massively in favour of OECD countries that it has provoked considerable resentment in the Third world because it does not have an adequate voice in those bodies, which dispose of enormous financial resources for the alleviation of world poverty and the problems of the Third world. If the IFAD structure could be adapted or extended by other bodies it could go some way to meet that criticism of Third world countries.
I prefer to call the fund IFAD. I do not like the Minister's IF; there are too many "ifs" in the aid programme. The senior staff of the fund are predominantly from the Third world. For example, the director is a


distinguished Saudi Arabian. The staff are, therefore, probably more receptive and more knowledgeable about the problems of the countries that wish to draw on the fund's resources than might be the case.
The primary function of IFAD is to assist the rural poor with food production and particularly to help small farmers and even some landless peasants to produce more food. It operates not alone, but in conjunction with other agencies, both financial and technical, and the countries assisted so far include Nicaragua, Bangladesh and Pakistan, where loans were distributed to about 10,000 villages throughout the country. Help has also been given to Nepal, Indonesia, Ethiopia, Egypt and, as has been mentioned, for the first time to Cuba.
Considerable help was given to 15,000 small farmers in Nicaragua who had taken over the estates of the notorious Somoza. They were badly in need of credit to purchase equipment, seed, fertilisers and so on. The IFAD money was used to good purpose, because the crops grown were maize, beans, Sorghum and rice, which were of direct value to the people there.
There has been no dispute so far in this mini debate about the value of the fund, but it should be pointed out that its value has not been reflected in the generosity of contributions from the major contributors. The initial contribution of the United States was $230 million under President Carter and that has fallen to $185 million under President Reagan. Our own contribution, as has been pointed out, was £18 million initially and only £12·9 million on the second occasion. Since those cash figures do not allow for the effect of inflation, the actual fall must be far more drastic. I take the Minister's point that the dollar exchange rate makes some difference to those figures. Even so, there was a fall between the two contributions and an even bigger fall when allowance has been made for the effect of inflation. That is extremely regrettable in an international institution that is just beginning to find its feet and is fairly widely admired for its valuable work. I am sorry that the Government have not seen fit to contribute on the scale of the initial contribution.
As has been said, the Western world is not the only offender. Iran made a major contribution originally, but little subsequently. Another curious absentee is Mexico. I am disinclined to criticise Mexico, because it has been generous with its oil resources to Caribbean countries and has given them considerable help. However, as a major oil producer, deriving considerable wealth from it, I am a little surprised that the Mexican Government have not contributed to the fund.
A disturbing feature is the slow rate of disbursement. The Minister mentioned that, but he gave no reasons. We should use our influence within IFAD to speed up disbursement or at least to find out why it is so slow.
The world food problem is formidable. The latest World Bank report says that the production of food grains has been relatively stable for a year or two at 1,500 million tonnes. However, populations are increasing and, as incomes in some countries increase, demand is increasing too.
In 1970–71 the poorer countries imported about 20 million tonnes of food grain at a cost of $2,000 million. By 1980–81, according to the World Bank, those imports had shot up to 50 million tonnes at a cost of $10,000

million. Again allowing for the exchange rate, they were paying double for their food imports at the end of that decade.
South-East Asia food production has increased and the position is more favourable, but in sub-Saharan Africa the position is getting worse. The production of food is falling and the strain on the balance of payments of those countries in importing food—which they are forced to do in greater and greater quantities—is becoming serious.
A curious feature of the world food situation is the flow of food from the poor to the rich world. An interesting study that I read recently claimed that the United States was a net importer of meat and fish and fish products on a large scale. We have the odd situation that in real terms the poor world is supplying food net to the rich world. This state of affairs must be examined to determine whether the situation can be remedied by aid policies, technological help or by some other means.
I am concerned about the negative and selfish attitude of the United States, Canada and Australia at the world food conference last month in the United States. I refer to the attitude that they adopted to the proposition that there should be, as it were, a strategic international grain reserve of 12 million tonnes. My hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) said that world grain reserves had fallen dangerously over the past few years and that if there were a major failure in either the northern or southern hemisphere, or, as disastrously occurred in 1973, in both, the situation for the poorest countries would be terrifying.
It was proposed at the Acapulco conference that there should be an international reserve of 12 million tonnes. For selfish, stupid, and ideological reasons it was resisted by the United States and, I regret to say, by two important Commonwealth countries, Canada and Australia. Britain is not a world food exporter—it is a net importer and not, therefore, in the same league as the United States, Canada and Australia—but I hope that it will use its influence in IFAD, in FAO and within other international agencies to ensure that there is an adequate international strategic grain reserve against the day that will surely come when there is a serious harvest failure in either the North or the South in a major grain-producing part of the world. If a reserve is established, there will at least be stocks to preserve millions from sheer desperate famine. Even though we are not producing as much money as we should for aid, I hope that we shall show that we are aware of the problem and are prepared to bring our skill, influence and advice to bear to change the attitude of the depressing Administration in Washington.

Mr. Christopher Brocklebank-Fowler: The international fund for agricultural development was born following the world food conference in 1974 in Rome. Its purpose was to attract new foreign funds, principally from the OPEC countries, to try to give a major lift to the world resources being devoted to the production of food in developing countries.
We have debated the subject only since 1977, and that debate took place in the Fourth Standing Committee on Statutory Instruments on 13 July 1977. The first order was then laid and we voted an initial contribution of £18 million. At that time, as a member of the Conservative Party, I was the only spokesman for that party in the Committee to discuss the statutory instrument. I welcomed


the previous Labour Government's initiative in giving the United Kingdom's support to a major new venture that offered the prospect of more funds being drawn into international agricultural development and because the fund, as the hon. Members for Sheffield, Heeley (Mr. Hooley) and Glasgow, Queen's Park (Mr. McElhone) have said, was the first example, we hoped of many, of a much wider management of international resources being devoted to an international effort.
In welcoming the 1977 order, as I welcome this order tonight, I raised a number of questions that I hoped would be borne in mind as we watched the fund's progress. I was concerned that there might be some duplication of activity between IFAD and the FAO, the Food and Agricultural Organisation, which is also sited in Rome. I believed at that time—there are some grounds for thinking the same today—that there might be some competition between the two organisations in identifying the major and the most prestigious agricultural development projects throughout the developing world.
The world food shortage has not abated. With the enormous population growth in many major developing countries it is serious that so many countries are increasingly unable to be self-sufficient in food supplies. Those who supported the British Government's contribution to the fund looked to it to play a major part in encouraging the poorest developing countries to be self-sufficient. To what extent is the Minister satisfied that the fund is playing an important and new part in trying to bring that about?
One of the other questions that I raised in the earlier debate was about the possibility of funds being concentrated in Muslim countries. Although we welcome Arabic funds, fears were expressed that priority might be given to Muslim countries and that the funds would not get to non-Muslim countries south of the Sahara which are among the poorest countries in the world. Is the Minister satisfied that the funds are being fairly disbursed among the needy countries?
In the earlier debate I also asked about the staff. The Minister reported that about 30 staff were to be employed initially. I expressed surprise because I believed that a staff of 30 in Rome was unlikely to play a major part in identifying the types of development project that the fund was set up to finance. How many staff are now employed? Is the Minister satisfied with the fund's capacity to identify and appraise projects and to ensure that sufficient funds are allocated to them?
We recognise that all the major fund agencies, both multilateral and bilateral—particularly in relation to donor Governments which try to emphasise agricultural developments—are competing for a small market of major funds. Far too many recipient Governments engage their bureaucracies in identifying major projects, leading to imports of inappropriate equipment on a large scale, when more help could reach the poorest if smaller amounts of money were spent in smaller projects to meet the needs of local populations. I wonder whether we have the right balance. We should support financially viable and socially necessary projects at the lowest level, accepting that the administrative costs will be higher, so that it is in balance with the major projects for which most countries compete.
I have described some of the matters that I raised a few years ago. We must address ourselves to them constantly,

but I am certain that this is not the right forum to get down to the technical detail. I welcome the Minister's most helpful comments about the need for these matters to be examined by the appropriate Select Committee so that we can assure the British taxpayer that the moneys that they spend with a good heart are being used to good purpose.
I sometimes disagree with the Front Bench of the official Opposition. The problems of development are not always solved by throwing large sums of money at them. We must ensure that what we spend is spent effectively. I am a little worried that the rate of disbursement of funds from IFAD to the developing countries shows that there is a bottleneck. It may be a bottleneck of project identification, the availability of technicians and managers, just as is the case with the African Development Bank.

Mr. McElhone: I should like to assure the hon. Gentleman that we do not disagree. The problems are not solved by throwing money at them. All hon. Members who have spoken on this and the previous order are worried about the difficulty of disbursing the money. The Minister referred to $110 million being disbursed in 1981 as opposed to a commitment to more than $1,000 million. We do not disagree.

Mr. Brocklebank-Fowler: I am glad to hear that. We committed £18 million in the first stage. On 10 February, in answer to the hon. Member for Sheffield, Heeley (Mr. Hooley), the Minister reported that since 1978 the amounts drawn were £1·76 million in 1978, nil in 1979, nil in 1980, £0·88 million in 1981, and £2·11 million in the first quarter of 1982, making a total of £4·75 million over five years. Is that part of the initial £18 million or is it additional to it? What is the relationship between the £4·75 million and the sum that we are discussing in the order? Do they constitute the £18 million together, and what is the total commitment during the time that we have supported this important international institution? As both my and the Minister's mathematics are bad at this time of night, perhaps he will write to me on the matter.
The matter should be discussed in another arena. I give way to no one in my support for the efforts of British Governments to assist the poorest people in the poorest countries of the world. No need is more pressing than that of agricultural and rural development in the poorest countries. The fund can play a major part in doing that. As representatives of British taxpayers, we are right to press successive Governments to ensure that the funds that we vote are received by the countries concerned and that they are put to the most efficient use. That can only be achieved if we constantly review the matter in the Select Committee.

Mr. Richard Body: The hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler)—I suppose that I must not call him "my hon. Friend" any more—has argued this case in all the debates on this subject that I can remember over the years and has always been very persuasive. Nevertheless, I wish that I could persuade him of one proposition. He represents a large number of farmers in Norfolk, just as I represent a large number of farmers in my neighbouring constituency in Lincolnshire. In one respect, farmers are the same the world over. They will not begin the expensive process of


producing more food unless they can see the prospect of a reasonable return for what they produce. This is at the heart of the matter.
The hon. Member for Norfolk, North-West, the hon. Member for Sheffield, Heeley (Mr. Hooley) and indeed probably all of us have seen areas in which thousands of people are slowly dying of hunger. Yet in those same countries we have seen areas in which the soil and climate are capable of producing all the food necessary to feed those people. The only reason why that food is not being produced is that the people who are hungry do not have the money in their pockets or their loin cloths to buy the food that could be produced for them. That is the essential fact of the matter.
Not long ago, I saw some very rich alluvial soil in Senegal. I am not much of a farmer, but it looked just as good as the soil around the Wash in the constituency of the hon. Member for Norfolk, North-West and my own. It was rich alluvial soil capable of growing tremendous crops. Yet that land was not cultivated. Nothing was being grown there. It is a dreadful and wicked thing that that land should go uncultivated while down the road there are villages in which people are desperately hungry.
I am a little sceptical, however, about throwing more money in the way of this development fund to solve that problem. It will help to some extent, of course, but the real way to help is to lower the barriers that we have erected against so many Third world countries. The hon. Member for Heeley criticised the system whereby so many of them export food to the West, but if they want foreign exchange, if they want to generate wealth and jobs for their own people, they have little alternative. If they cannot grow food or produce textiles because we have put up barriers against them, what else can they do? If they are to get on to the launching pad, they must produce something that they can export to gain foreign exchange to develop themselves indusrially.
We in the West have been pursuing utterly selfish policies towards the Third world and we are causing many hundreds of thousands of people to lead very poor lives as a result.

Mr. Hooley: At the time of the greatest famine in Europe—in Ireland in the 1840s—Ireland was exporting large quantities of valuable food. That food did not go to the 2 million people who were dying of starvation. It is no answer to say that if one adapts prices to market forces the problem of hunger will be solved.

Mr. Body: The famine of the 1840s was a terrible experience for Ireland, although I hesitate to agree that it was the worse famine in Europe. I am sure that the hon. Gentleman has studied the subject, so he will be aware that there were other factors involved in causing the potato disease and the terrible famine and distress that followed. I hope that he will not overlook that.
My contribution will be very brief. I simply wish to emphasise that the right way to help the Third world countries is for us to be much less selfish towards them and to pull down the barriers that we have erected against them. We are now putting up barriers against textiles, which are an essential industry for so many Third world countries. We have also erected barriers against their foodstuffs.
My hon. Friend the Member for Norfolk, North-West—I am sure that he will not mind my calling him "my

hon. Friend"—has argued in favour of the Lomé convention, but in his travels in the Third world he must have heard the criticism that the Lomé convention is not really helping. What is really needed is for this country and the developed world as a whole to be a great deal less selfish toward the Third world. We must bring down the barriers and allow the products that they can produce cheaply to come in. In that way they will obtain the foreign exchange and the income to enable them to develop. That is the only honest and honourable way to help the Third world. I urge my hon. Friend to bear that in mind.
I ask my hon. Friend to acquit me of any discourtesy for not being in the Chamber at the beginning of his speech. I was detained elsewhere.

Mr. John Sever: I thank the Minister for his kind welcome to me on my first attempt to debate with him at the Dispatch Box the issues of overseas development.
Closely on the heels of that, I want the Minister to know that I consider it one of my foremost duties to explain to him, as I am sure he will accept, that, strangely enough, I have almost a constituency interest in this debate. Many of my constituents in Ladywood originally came from some of the areas covered by the order and many of them belong to the ethnic minority communities. Therefore, these matters, particularly aid to the original homelands of my constituents, are of importance to me.
I hope that the Minister will accept the arguments put to him concerning the positive and forthright way in which he should pursue these matters. I am sure that he has noticed that the speeches have been made with conviction and a great deal of thought and anxiety for those who are in far worse situations than people in this country.
I refer specifically to India and Pakistan. Many of my constituents came from those countries. They, and many thousands of families in Britain, hope that the Government's commitment to India and Pakistan and to South-East Asia will be continued and improved upon.
Many of the families and loved ones of those now living in Britain are in South-East Asia and the Indian subcontinent. Those areas are of concern to many British electors. Every Government would be wise to remember that. Our help and co-operation must be offered in far greater measure to those Asian countries with whom our own history is inextricably woven. For example, India's agricultural programmes continue to improve, but we should be doing whatever we can, with all haste and vigour, to improve on those programmes. I believe that the Minister is sympathetic to that general view and I hope that he will use his influence in the spheres in which he operates to pursue those objectives.
I remind the Minister that thousands of children who are barely alive this evening will be dead tomorrow. They will die because they are suffering from malnutrition, starvation and the lack of proper medical attention. The funding of this organisation is crucial to the development of the countries concerned, but in real terms it is crucial to the lives of the individuals. Countless millions of people are dependent upon the wealthy industrialised nations such as our own for support and assistance to get through one day and into the next. We must look for every possible opportunity of giving assistance and providing the


necessary funds for the programmes we are debating tonight. We must improve the lot of all those who so desperately need our help.
The starving world cannot be happy with what the rest of us do on their behalf. We can, with a degree of modesty, claim to be helping in some small way. However, that help is not sufficient. The money that we give is not enough. I suspect, as one of my hon. Friends said earlier, that the Minister wishes he could have come to the House with a proposal for supplying more money to the aid programme. If we concede that the Minister wishes to do that, it is incumbent on him to say how he will improve things in the future.
Some of my hon. Friends have referred to matters of particular interest to themselves, but the underlying theme reflects our concern and worry that the disbursement of the money in the fund is not rapid enough and that the funds are not being used by those for whom they are intended at the speed that we would wish to achieve the maximum help in the shortest possible time. I urge the Minister to do everything he can to ensure that his fellow donors realise the importance that hon. Members attach to the rapid disbursement of the funds.
I do not think that is a difficult job. I am sure that he can put the case quite admirably. If by doing so there is a quicker response to the needs of the developing and underprivileged world, many of us would feel a lot happier, not only that we have made a modest contribution to the fund but that what we have given goes to where it is needed in the shortest possible time.
My hon. Friend the Member for Don Valley (Mr. Welsh) used two phrases that stuck in my mind. He talked about the conquest of hunger and providing food for the needy. If the order is not about those two things, it is about nothing. Those considerations are crucial to our argument and to the way in which we should like to see the fund operate in the future. We should all remember that unless this money gets to these people in the shortest possible time, many of them will die. People will die anyway, whether or not the money is disbursed effectively.
The official Opposition are not arguing that we must simply throw money at the problem. My hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) responded to that point. The amount of money we give is of the utmost importance to the future of the fund and the future well being of those in greatest need. That is the force of our argument, and we are pleased to be able to support the introduction of this replenishment order.
My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) referred to the tripartite arrangements for the management of the fund. We welcome the way in which the overseas aid programmes of the industrialised countries are operated. We are glad that representatives of the recipients are at the very source of decision making. Those representatives are important people and can advise how the fund should be disposed of.
My hon. Friend also asked about the action that the Minister will take to speed up the disbursement of the funds. I do not wish to labour that point further, but it is of the utmost importance that we try to get that message across. By his assent, the Minister is acknowledging what I am trying to say. Perhaps he will explain how he can best achieve that.
The hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) raised points that are just as relevant today as they were a few years ago. I welcome his brief history lesson in support of the order.
Does the Minister consider that the small amount of money given to Nicaragua for flood relief is sufficient for such a large problem? Does he believe, with the benefit of hindsight, that the Government might have been rather more generous? The sum was not adequate to cover the problems faced by a country that has only recently brought itself to the position whereby it can have meaningful development after a long time under a tyrannical regime. Nicaragua should have support from Britain for its inherent problems following such an upheaval and natural disaster.
The argument about the way in which aid is disbursed from wealthy countries to those most in need could keep us going for a long time. When the Minister next meets his European colleagues, perhaps he will ask them whether they are prepared to extend their sphere of influence to the parts of the world that they do not at present assist. The Government should be more purposeful in encouraging our European partners to find more money to aid countries that have been overlooked. I hesitate to say "ignored", because I am sure that they are not, but they seem to be overlooked. If the Minister puts some of the points raised tonight to his European colleagues, the wealthier nations might give more money to the countries with the greatest problems. It might encourage us to give more support to the European arrangement.
I know that it is difficult for the Minister because he is not totally in control of the matter, but he has influence and I hope that he will use it. I appreciate that the hon. Gentleman may not be able to answer all of my points immediately. If he cannot, I hope that he will write to me soon so that we may know the Government's thinking on such crucial matters to the Third world, the under-privileged and the starving.
The Minister may find that from time to time I shall wish to talk to him about the way in which Britain deals with overseas development. I hope that I shall find an open door when I wish to make representations to him on behalf of my colleagues. There is a growing awareness in Britain of the duties that fall upon the wealthier countries to do something about the under-privileged and disadvantaged. The best evidence of that is the massive lobby of the House earlier this year. The Minister, my hon. Friend the Member for Queen's Park and many other right hon. and hon. Members addressed the meeting, following the publication of the "North-South" report. For so many people to take the trouble to come to the House on such an effective lobby shows the enormous concern about our commitments to the Third world. I know that the right hon. Gentleman was impressed by that demonstration of public support for the policies that must be pursued to bring about improvements. The Minister should do everything that he can to show the Government's continuing support for the proposition that the overseas aid programme should be extended. Some more positive proposals should be brought forward so that we can obtain more money for programmes that we are keen to support.

Mr. Neil Marten: If the hon. Member for Birmingham, Ladywood (Mr. Sever) wishes to see me to


talk about these matters he should contact me and we can arrange a time. It is useful to be able to chat privately as it helps matters to proceed smoothly.
I am grateful for the views that have been expressed, and I shall read the report of the debate over the weekend and take to heart many of the points that have been raised. All hon. Members have stressed the immense problems facing the poorer countries in feeding their growing populations. The hon. Member for Glasgow, Queen's Park (Mr. McElhone) made that point in his eloquent speech.
IFAD is not the only aid institution. The World Bank, the various regional banks and the Arican development fund; that we discussed earlier, together provide more aid for agriculture than IFAD. We do a great deal bilaterally. IFAD is young and unique. Whatever differences of opinion we may have had on some points everyone will unanimously support our continued backing for the fund; and it is in that spirit that I commend the draft order to the House.

Question put and agreed to.

Resolved,
That the draft International Fund for Agricultural Development (First Replenishment) Order 1982, which was laid before this House on 21st June, be approved.

Orders of the Day — Building Societies

The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne): I beg to move,
That the draft Building Societies (Special Advances) Order 1982, which was laid before this House on 22 June, be approved.
This order increases from £37,500 to £60,000 the limit above which a sum lent to a person by a building society is treated as a special advance.
Under the Building Societies Act 1962, special advances, which also include all loans to companies, are limited to a certain proportion of all loans made in a year. This proportion is normally 10 per cent. but is reduced in certain circumstances.
The special advances limit had its origins in the abuses which developed in some societies in the 1950s with speculative loans usually linked in some way to the interests of directors, and which led to the collapse of the State Building Society. The object of the special advance provisions in the Building Societies Act 1960 was to limit the amounts which could be advanced, other than for financing owner-occupation,
Because of the problems of providing a legal definition of owner-occupation, special advances were defined as being all advances to companies and large advances to individuals. The intention in setting the cut-off, originally at £5,000, was to pitch it at a level which would catch few, if any, advances to owner-occupiers. Since 1960 the limit has been increased six times. The present limit of £37,500 was set on 1 January 1981.
It is necessary to have a special advances limit that is set at a level such that any significant loans other than for owner-occupation will be classified as special advances. However, for prudential purposes the limit does not need to be lower than the level at which one can say that the presumption must be that the majority of loans above it will not be for owner-occupation.
I must stress that the essential reason for the regulation of special advances is prudential. Moreover, setting the limit too low imposes a burden on societies' administration and can constrain societies in their competition with the banks, as banks are not subject to similar restrictions in this respect.
The limitation on the ability of societies to compete is greater than might be suggested by the fact that they are allowed to make 10 per cent. of their advances as special advances. Because of the statutory requirements, they must have centralised systems within the society for controlling the amount of special advances, and they have to build into that system allowance for the fact that commitments for special advances may turn into loans at a different rate from commitments for ordinary advances.
When the 1979 limit was set it was perhaps pitched on the low side and not in line with the rise in the average level of mortgages, because there was then a shortage of mortgages and the circumstances were different from those that prevail today. Today we have the entry of the banks into the mortgage market, and that, as I am sure that the hon. Member for Blackburn (Mr. Straw) will agree, creates a considerable transformation in the nature of the market.
There is no longer a mortgage famine, and I think that it would be conceded by hon. Members on both sides of the House that any credit-worthy borrower today who


wants a mortgage can get one. This fact was recognised by my right hon. Friend the former Financial Secretary, when he explained the basis for the previous increase to the Sixth Standing Committee on Statutory Instruments, &c. in December 1980. In the light of these conditions we have felt it right to make the figure up to what is in our judgment an appropriate prudential level.
The Chief Registrar of Friendly Societies is satisfied that setting the figure at anything below L60,000—which is broadly equivalent to about two and a half times the average house sale price—is unnecessary on prudential grounds. Furthermore, I should draw the attention of the House to the assurance the Building Societies Association gave to the Chief Registrar when it wrote to him in February to request the increase in the limit on special advances which we are discussing tonight.
The secretary-general, Mr. Richard Weir, said:
Certainly, there is no intention on the part of any society to reduce its lending at the lower end of the market. Indeed, the new conditions in the mortgage market mean that societies are anxiously looking for new business across the whole spectrum of the housing market".
The average building society advance in the United Kingdom in 1981 was less than £15,000 and it is reasonable to expect that the vast majority of advances will continue to be at that sort of level. The societies make considerable efforts to ensure that first-time buyers and those at the rower end of the market are helped to the greatest possible extent.
Although the effective date of the draft order is to be 1 September 1982, a building society will not be able to work to the new limit until its next following financial year. For most societies this will mean that they will be able to work to the new limit as from 1 January 1983. However, about one-third of societies, including two of the top five, have accounting years which end before 31 December and the order will, therefore, take effect for those societies for the year 1982–83.
Although this is an increase of 60 per cent. on the previous figure—I remind the House that it is a similar percentage increase to that made by the Labour Government in 1975—

Mr. Jack Straw: Will the Financial Secretary say when the limit had been raised before 1975? It was certainly much longer than the 18 months on this occasion.

Mr. Bruce-Gardyne: That is neither here nor there. I am merely pointing to the fact that the increase that we propose is by no means unprecedented. That is a point that the hon. Gentleman will have to concede.

Mr. Jim Craigen: Do I take it that the Government follow precedents set by Labour Governments on other matters, too?

Mr. Bruce-Gardyne: There are few precedents set by a Labour Government that I imagine this Government would wish to follow, and very few that I would follow the Government in following.
I assure the House that our purpose in proposing this increase is that it should contain an element for forward provision to avoid the need for several years to come back to the House for a further increase in the limit, and also to reduce the demands on parliamentary time. The

proposal will assist building societies to compete fairly with the clearing banks, and in particular it will assist some of the smaller societies, which need to make high-value loans because of higher house prices in their areas.
In view of the assurances which the buildng societies have given, and which I have quoted, about their intentions on future lending, as the limit is essentially a prudential measure, and as the Chief Registrar of Friendly Societies is satisfied that the demands of prudentiality are met by this proposal in what is a highly competitve market with another institution—the banks—which is not subject to this restriction, I hope that the House will give the order a fair wind.

Mr. Jack Straw: As the Economic Secretary said, this special advances limit was originally set in the Building Societies Act 1960 in the wake of, among other things, the scandal of the collapse of the State Building Society. Before that, there were no restrictions in law on the size of a loan which building societies could provide, as long as the loan was secured on freehold or leasehold property.
We should remember that the limit on special advances does not prohibit building societies from offering loans above that figure. It simply ensures that those loans are subject to certain conditions, and that they are rationed to 10 per cent. of the total lending of the society.
The Financial Secretary made much of what he described as the prudential reasons for agreeing this scheme of special advances in the 1960 Act. If one reads the Second Reading debate which took place in June 1960, it is clear that the House, at that stage, saw the concept of prudentiality in its widest sense. It was aimed not only at limiting the damage that could be done by any knaves or fools running the building societies but at ensuring that the building societies kept their side of the compact that they and the House had entered into, and that in return for substantial tax concessions and, yes, a benign acceptance of the cartelised market in which the building societies work they would meet the social objective set by their members and by Parliament of providing access to owner-occupied housing and the cheapest possible price.
In moving the Second Reading of the 1960 Bill, the then Chancellor of the Exchequer, Mr. Heathcoat Amory, said:
The first two Clauses … come straight to the crux of the matter by seeking to ensure that building societies concentrate their main efforts on their traditional and proper business, which is advancing money on the security of owner-occupied property."—[Official Report, 20 June 1960; Vol. 625, c. 35.]
It was in that context that the Chancellor of the Exchequer commended the clauses dealing with special advances. Parliament's idea of prudentiality was certainly wider than merely ensuring that people such as those who had been running the State Building Society were not advantaged, as they had been, by making fraudulent or crooked gains. It is against the yardstick of the social purpose that the societies are supposed to be fulfilling that the order, which has the active support of the societies, must be judged.
The Economic Secretary's case in support of the order was inadequate. I know that the hon. Gentleman is not as attached as the previous Financial Secretary to the Treasury was to indexing everything that moves, but he justified the limit increase by reference to previous increases, such as that in 1975, which had been justified by reference to rises in retail prices or house prices.
A major part of the discussions on the increase orders in 1979 and 1980 related to the need to index the limit in line with retail prices or house prices. The previous Financial Secretary sought to justify the substantial increase in 1980 and referred to the revalorisation of the then £20,000. He said:
the right hon. Gentleman offered me two methods, and I shall give both—on the change in prices, the £20,000 that his Government set would now be £38,000, and if we indexed the figure by house prices it would be even higher."—[Official Report, Sixth Standing Committee on Statutory Instruments, &amp;c., 16, December 1980; c. 12]
The Financial Secretary was not putting the full case. The limit was introduced in 1962 and since then the RPI has gone up by 420 per cent. and the index of house prices has risen by about 650 per cent. If we revalorised the original £5,000 it would be £26,000 on the basis of the RPI increases and £38,000 on the basis of the rise in house prices—and £37,500 is the present limit. On the basis of the rise in those two indexes there is no justification for increasing the order by 50 per cent. to £60,000.

Mr. Bruce-Gardyne: rose—

Mr. Straw: This is not the first time in a Parliament that the Government have come to the House to seek approval for an increase, but in less than three years the Government have sought three successive increases and have sought to build one on top of another. The first two increases were justified to Parliament on the basis of the need to valorise them. The Economic Secretary made plain the fact that the last Labour Government had increased the rate substantially and that that was somehow a justification for what he is seeking to do.
The Economic Secretary's second argument was based on the relationship between the size of average mortgage advances and the size of this special advance limit. He said that it was important that the majority of loans above the limit should not be for owner-occupation. On the figures that he gave to the House, the truth is that the £37,500 limit was more than adequate. He admitted that the average advance in the United Kingdom in 1980 was less than £15,000 and even in the South-East the average advance was only £16,214. For first-time buyers, about whom we are all concerned, the average advance in the South-East was £15,362. The existing limit is two and a half times more than the average advance and, on that basis, there is no case for increasing the limit by a further £22,500 to £60,000. In any event, the limit on special advances does not prohibit advances over £37,500 or £60,000. It simply rations them and ensures that certain conditions are imposed on their use and quantity.
The Financial Secretary—

Mr. Bruce-Gardyne: The Economic Secretary.

Mr. Straw: I apologise to the hon. Gentleman. He will know from his experience on the Finance Bill that there were occasions late at night when I mistook him for his hon. Friend the Financial Secretary.
The Economic Secretary's third argument was that there would be no effect on lending at the lower end of the market if lending at the upper end of the market was facilitated and was likely to increase. I find that an odd argument coming from the arch-priest of the crowding-out theory of the operation of monetary markets. If an increase is needed at the upper end, its introduction is bound to have an effect, other things being equal, on the ability and

facility of building societies to lend at the bottom end of the market. If it is not needed and it will not have any effect, the Government should not be bringing forward the order. Of course, it will have an effect. It is bound to do so and that point was well made not only by hon. Members on the Opposition benches but also by the hon. Member for Liverpool, Wavertree (Mr. Steen) in Committee in December 1980. The hon. Gentleman spoke eloquently of the way in which the increase in the limit on special advances would have an adverse effect on building society loans to first-tin e buyers in inner city areas. He complained about the societies' red-lining habits.
The Economic Secretary spoke of the way in which the societies have made efforts to lend to first-time buyers and to those in the lower end of the market and their commitment to continue to do so. I acknowledge that they have done that, but I recognise from my experience when I worked at the Department of the Environment, as well as my experience as a councillor and a Member, that the societies have made these changes in their approach and attitudes towards red-lining, inner city areas, first-time buyers and lending on older property only as a result of pressure that has been applied from outside. They are deeply cautious and conservative institutions. It has required a great deal of pressure and effort from outside the so-called building society movement to get them to meet their social objectives.

Mr. Bruce-Gardyne: I am bemused by the hon. Gentleman's argument. Will he spell out the precise connection between what he calls red-lining by the societies and special advances? The connection is not immediately apparent to me.

Mr. Straw: I did not suggest that there was one. I merely drew attention to the argument of the hon. Member for Wavertree in December 1980 against the increase from £25,000 to £37,500. He complained about the way in which increasing the upper limit would have an effect on lending in inner city areas and on cheap property and en passant he protested about the societies' red-lining activities.

Mr. Eric Cockeram: The alleged red-lining to which the hon. Gentleman refers is one of the myths that is perpetuated, but it is not borne out by the facts, as was amply demonstrated in the riots of last year in both Toxteth and Brixton when societies were shown to be lending on many properties in those areas. It is a practice that does not exist, but we are constantly hearing references to it. The local authorities on Merseyside accept that it does not apply in their areas.

Mr. Straw: The hon. Gentleman represents a constituency in the Merseyside area that is Conservative and he had better take up the argument with his hon. Friend the Member for Wavertree, who represents a Conservative constituency on Merseyside, who says that the order provides further evidence that red-lining exists. I know that the societies have changed their attitudes, but my experience in the DoE and as the candidate and Member for Blackburn is that societies red-line. I was able to produce to them chapter and verse the practices that were being implemented in the Blackburn area three and four years ago. We know that the societies red-lined in the old days. They have changed their approach only because of the pressure that has been exerted from outside.

Mr. Bruce-Gardyne: The hon. Gentleman has twice reiterated his allegation that the societies are indulging in what he describes as red-lining. My hon. Friend the Member for Ludlow (Mr. Cockerham), who has considerable experience in these matters, put the kybosh on that. I still do not understand the connection between what the hon. Gentleman describes as red-lining and the special advances that we are discussing.

Mr. Straw: I repeat for the hon. Gentleman's benefit that I have never suggested that there is a direct connection between these two factors. I was repeating what the hon. Member for Wavertree had said about red-lining in condemning the Government's proposal to increase the limit from £25,000 to £37,500. However, I assert that increasing the limit in this way is bound to have an effect on the societies' ability to lend at the lower end of the market. There can be no doubt about that.
We have heard no justification for this massive increase in the upper limit of special advances. Building societies have extensive tax concessions from the House in order to serve the social purpose of ensuring that the overwhelming bulk of their funds goes towards owner-occupation. They are not there to enter into loans on office property or other speculative ventures. The duty of the House is to ensure that they meet their social obligations, and that is why Labour Members oppose the measure.

Mr. Eric Cockeram: I support the proposal in the order for the reasons that were fully explained by my right hon. and learned Friend the Chancellor of the Exchequer in a paper that he delivered to the Building Societies Conference last May. The need for a revision of the figure in the light of the competition that the building societies are facing from the banks was fully covered on that occasion.
Before I go any further, I should declare an interest. I apologise for the fact that I did not do so at the outset. I am a director of the Midshires Building Society.
There is a basic defect in the administration of special advances. As has been explained by the Economic Secretary, they are limited to 10 per cent. of the advances of any one society in any one financial year. Very rarely does any society get anywhere near that figure. Last year the total was only 1·5 per cent. overall.
While most building societies run their financial year on a calendar basis from 1 January, they obviously do not know in the early part of the year how much money they will be able to lend during the course of it. Economic conditions can change. Financial crises more often than not take place in the autumn. There have been big jumps in the minimum lending rate in the past in the autumn. That all has its effect on building society mortgages.
The conclusion to be drawn from that is that building societies do not know until about October/November what their total mortgage advances might be in any one year. Consequently, they must be exceedingly cautious in the early part of the year in granting any special advances in case they lend their estimated total mortgage advances in the year and then find, because of changed economic circumstances in the latter part of the year, that they are nowhere near that estimate.
Total building society advances in any one year can vary greatly. In one year a building society can lend three times what was lent in the preceding year or will be lent

in the succeeding year. Therefore, it is not until the autumn that a building society whose financial year ends on 31 December, as the majority do, has any idea of its total advances in a year.
This cumbersome procedure, laying down a maximum of 10 per cent. in any one year, introduces considerable administrative problems for building societies. It also introduces anomalies in that it is easier to get a special advance in November or December than it is in January or February.
That administrative difficulty does not arise with other financial institutions lending on mortgage, such as clearing banks or insurance companies.
I hope that the Economic Secretary will take the problem on board and soon introduce a revised formula which is based not on a percentage of the annual mortgages in any one year, but on a percentage of a building society's total mortgages outstanding. I do not suggest that the figures should be 10 per cent., 7·5 per cent. or even 5 per cent. Whatever the percentage, there would be some certainly to enable a building society to know what it could lend in a year. That would allow it to spread lending throughout the year rather than to have a famine at the beginning of the financial year and a feast at the end. That is in nobody's interest.
As the Economic Secretary explained, a number of orders have varied the ceiling. One of the objects of the large jump—the Government do not deny that it is a large jump—is to ensure that the House does not have to consider the matter again in the next year or two, perhaps not for five or more years. That makes sense. An 80 per cent. mortgage of £40,000, on a £50,000 house, for example, is not extraordinary these days. The average price of a house is about £25,000. A £50,000 house is worth twice the average. A person earning twice or two-and-a-half times the average wage seeking an 80 per cent. mortgage is not extraordinary. Today such a person would be forced to go to a bank rather than a building society because of the £37,500 ceiling. That is wrong.
Labour Members should be reminded that the tax concession limit of £25,000 remains. It has nothing to do with the new figure. Allegations that this is a trough into which tax avoiders are pushing their snouts are unjustified. The mortgage interest allowable for tax is not affected.
The order should be approved, but I hope that the Government will accept that this antique form of controlling the limit, based on an annual figure which is not known until the eleventh or twelth month of the financial year, is an inefficient way to control the ceiling. I hope that it will be adjusted to a lower figure, fixed at a known percentage of the total advances outstanding.

Mr. Ken Weetch: The Government's intention has been evident for some time. It was first signalled in the Chancellor of the Exchequer's remarkable speech to the Building Societies Association on 8 May. The House should not approve the order, because there is no good reason for an increase of the magnitude proposed.
There is no economic justification for the order. The Economic Secretary's case was the worst building society argument that I have heard in the House. A rise from £37,500 to £60,000 is proposed. That is a 60 per cent. rise. In November 1979 the limit went from £20,000 to £25,000. That was a 25 per cent. increase. In December 1980 the limit went from £25,000 to £37,500—a 50 per


cent increase. We now have a 60 per cent. increase. The property market has not moved in the same way. In 1981 there was no increase in house prices to speak of. We shall be lucky, or unlucky, as the case may be, if there is an increase of 10 per cent. in 1982. There is no case for the increase, even on the Building Societies Association's figures.
In 1960 the special advance limit was £5,000 and the average price of a house was £2,530. The ratio of the special advance limit to the average house prices was 1:1·98. In 1982, with a special advance limit, if the order is passed, of £60,000, and the average house costing £25,000, the ratio will go to 1:2·40. If the ratio had gone in the other direction there might have been a case for the order, but on the present figures there is none.

Mr. Bruce-Gardyne: To reinforce his argument, will the hon. Gentleman draw attention to the part of the 1960 Act which explains that the basis of the special advance limit is related to a ratio between house purchases and the point at which the limit is set?

Mr. Weetch: As far as I am aware, there is no connection between the two in the Building Societies Act 1962. My point is that there is no economic argument for the increase. That is my minor argument.
I come now to my major argument. The second reason for the order is to give the building societies more competitive flexibility with the banks, which operate within no special limits. That is the unvarnished argument that has been advanced. It is a dangerous half truth. A half truth is worse than no truth at all.
The banks are not affected by the special financial constraint of the Building Societies Act 1962, but they are affected by others that are not imposed on the building societies. The Consumer Credit Act 1974 is one. It requires the banks to quote the true rate of interest on a mortgage. They must abide by a calculation that is known as the APR. They must conform to the truth in lending, as provided for in the Act. Building societies do not. They can and do quote rates which, in many respects, are misleading. That is so because when building societies quote rates of interest on a mortgage they are not required to reflect the capital repayment that must be made during the year. The banks must do so, and when they advertise the rate of interst on mortgages they do so in a way that gives them a competitive disadvantage.
At present, some banks have a published interest rate of 13¾ per cent. The building society rate is 13½ per cent. But, on the terms of the Consumer Credit Act, the true rates of interest, according to the APR, are exactly the same. The banks, which now take 25 per cent. of the mortgage market are labouring under a substantial disadvantage.
When one discusses the constraints on building societies, one must examine the overall competitive circumstances, which are much more complicated. The building societies pay 40 per cent. corporation tax. The banks pay 52 per cent. Building societies can raise money more cheaply because of their composite tax arrangements. The banks cannot do that. The competitive position is multi-sided and highly complex. Therefore, to justify the order by asserting an elimination of the competitive disadvantage of building societies is, I suggest, a flagrant abuse of argument.

Mr. Peter Fry: I have been following the horn. Gentleman's argument with great interest. He is saying, in effect, that there are constraints upon the banks that do not apply to building societies and that the banks are in fact suffering a disadvantage. Yet he has given figures showing that the banks have greatly increased their share of the mortgage market. That seems to argue against his own line of thought. Is he suggesting that there should be more constraints on building societies? If so, presumably they would then lend less, so what would they do with the money from their investors?

Mr. Weetch: I can answer that point directly. I am arguing that we must look at the competitive position as a whole. It is true that the banks have made great strides forward and have taken 25 per cent. of the mortgage market, but that is because they have approached that market in an extremely efficient way and have provided much-needed competition in this area. Moreover, if the banks laboured under fewer constraints they would take an even bigger percentage of the mortgage market, and I look forward to their doing so.
The third reason why I oppose the order is my most serious objection. Special advances, which are the subject of the order, are inadequately monitored by the Treasury to prevent inaccuracies, misinformation and opportunities for abuse. The £60,000 limit is very high. It has been explained away by the argument that instead of the building societies having to come to the House for increases in dribs and drabs we should agree a limit of £60,000 now so that they will not have to come back to us for a few years.
I take the opposite view. Until monitoring procedures are tightened up, the more often the building societies have to come to Parliament for scrutiny of these special advances, the better, because there is no adequate scrutiny in any other quarter. I shall explain in detail what I mean by that.
Special advances are of two kinds. The first is to individuals. This is where the figure of £60,000 conies in. The second is to corporate bodies, a corporate body being an artificial person defined legally. The advances are different in nature—first, according to the amount, and, secondly, according to the character of the recipient Both special advances must be declared on form AR11, which is the main financial statement of a building society in the course of the year.
What is not known is that most building societies do riot present that main financial document in any shape or form for scrutiny at their annual general meetings. Thus, if I went to my building society's AGM wishing to ask the most important questions about the accounts, the document would not be there. Moreover, as the financial year of a building society is the calendar year and the annual general meeting is held in, say, the following April, members cannot ask questions at the meeting because the AR11 for the year in question is not available. The questions have to wait until the following annual general meeting, when the main financial document will be two years out of date.
That is no accident. It is deliberate manipulation so that the information is kept from the body of the membership to prevent them from asking questions at the appropriate time. I have long been convinced of that. By the time the


member asks questions, even if he knows that the AR11 is available—though no one tells him that it is—he is labouring under a great disadvantage.
It is also the case, as I have found from specific instances that I have researched, that corporate special advances stated in the AR11 go through the Treasury's monitoring procedures on the nod. I am convinced of that. The public have no safety net in the Treasury. I give a recent example by referring to that bastion of English democracy, the Anglia Building Society. Purely by chance my research assistant recently discovered that the Anglia Building Society advances return was inaccurate. We have looked at only one building society, because I do not have the resources at my disposal to do otherwise, and there are about 250 building societies.
In 1981 there were 15 corporate special advances amounting to £749,664. Most of that money went to property developers or insurance brokers, but there were other weird and wonderful things listed on the AR11, including a private nursing home. I do not know how these advances are made, but I strongly suspect that they are made on an old boy network. In any case, we have a building society pattern of corporate lending under the specialised advance procedure which, by and large, comes within a framework of an incestuous old boy property network.
I guarantee that an examination of any AR11 of a building society that deals substantially in corporate advances will show that much of the money is channelled very conveniently to property developers or people in the property market who are making money out of it in some way or another.
I return to the Anglia Building Society. The information is obscure, because when the specialised advances are listed the company is not named, but the number is. That is deliberate, too, to make it more difficult for members to find out where the money is going. My research assistant looked up the numbers returned to the Treasury in 1981. One of the loans went to a numbered company that had gone bankrupt in 1968. On the surface, at least, that was odd. On further investigation the Anglia Building Society said that it had sent in the wrong number to the Treasury. The financial document was, therefore, inaccurate. I discovered what the right number was. Surprise, surprise, the advance had gone to another property company.
Two other special advances could not be found from the 1981 AR11 for the Anglia Building Society. They could not be traced in the information given by Companies House in return for the numbers. It transpired that the corporate advances related to Scottish registered companies. I do not know how the ordinary building society member fares in all this, but my research assistant was ploughing through the records for hours and found no sign that the money had gone to Scottish companies. It is not that I object to money going to Scottish companies, but there should be something in the record. I doubt whether the ordinary building society member would be successful in such researches.
Nor did the special advances section of the Anglia return reveal the fact that the chairman of the Anglia Building Society was a member of Thornton Baker nominees, to whom the Anglia board advanced £105,000 in 1979 and £100,000 in 1980. With facts such as those,

I do not wonder that in recent elections to the Anglia Building Society the chairman manipulated the proxy vote so that the challenger lost the election. I do not wonder that building societies do their best to ensure that a democratic challenge from the body of the membership never succeeds. It is a pretty disgraceful and disreputable business, and the special advances section shows it up in all its murkiness.
Until a better method is found of scrutinising these special advances, the House should pass no more increase orders, because the situation is ripe for abuse, especially on the corporate side. There is a lack of proper and appropriate prudential supervision, which is highly unsatisfactory and should be remedied.

Mr. Peter Bottomley: I do not intend to follow all the assertions of the hon. Member for Ipswich (Mr. Weetch). I draw his attention to the problems of lending money, which probably apply equally well to banks as to building societies.
I hope that the Building Societies Association will pay attention to the hon. Gentleman's assertions and allegations of incorrect and unhelpful completion of accounts. I would prefer the association to deal with those, rather than load too much more on the Treasury.

Mr. Cockeram: Does my hon. Friend accept, contrary to what the hon. Member for Ipswich (Mr. Weech) said, that the AR1 Is are returnable to the Chief Registrar of Friendly Societies, who monitors, checks and supervises those forms? It is not the responsibility of the Building Societies Association; it is the responsibility of a civil servant. If allegations are made that such forms are incorrectly filled in, is that not a criticism of the Civil Service for not monitoring them?

Mr. Bottomley: I am not sure whether I follow the grammar of my hon. Friend's intervention. As well as the registrar carrying out his function, I am sure that the Building Societies Association would want to satisfy itself, if no one else that the best codes of practice are being followed.
I was about to make a favourable reference to the Treasury with regard to the inquiry into Civil Service pay. According to the performance review, between 40 per cent. and 70 per cent. of staff—presumably in the Treasury, though possibly spread around the rest of the Civil Service—perform their job outstandingly or very well. I hope that the Treasury will perform in a useful way in regard to housing finance.
The fact that no good argument for raising the limit has been put forward does not mean that the limit should not be raised. One should advance a good economic argument for not raising it, and that was not done by the hon. Member for Blackburn (Mr. Straw).
We should encourage the Economic Secretary to say what he intends to do about housing finance as a whole. It is clear that raising the special advances limit to £60,000 does not affect public expenditure. What affect public expenditure is general mortgage interest relief and the way that it is distributed over the family life cycle.
If we could gear more of our housing help—the tax expenditure on mortgage interest—to the time of family formation and cut people off when they are promoted or receive pay increases, presumably through merit, and if


we follow my right hon. and learned Friend the Chancellor's suggestion that there should be no pay increases—which I fully support—we could ask, "What are the economic bases for mortgage interest relief at twice the rate, if not more, that we allow for life insurance?" Is there economic value in having a larger mortgage, at least up to the £25,000 limit, instead of insuring one's life? Is it more valuable to increase one's mortgage from the average first figure of £12,000 to £25,000 if one's salary doubles? There is no economic advantage in that and I am sure that my hon. Friend would agree that people should put their money into business and start to create jobs, make profits and pay tax.
Perhaps we could open up this matter and examine housing financial help over the family life cycle, concentrate on family formation, reduce the demand for new council homes for young families and help to get the economy on the move. I hope that my hon. Friend will accept my gentle support for his order, but he must put on his thinking cap, come out into the open and say the sort of things that are politically unacceptable.
Sir John Hoskyns asked whether we should do something about mortgage interest relief. The economic answer is that we should. My hon. Friend probably agrees with that, but he is not allowed to say so. As a PPS, perhaps I am not allowed to say so either, but, as I support the Government on the matter, I wish to raise it before they propose to raise the £25,000 limit. It would be totally wrong to do that and it might even tempt me to vote against them, which I have promised not to do, at least in the foreseeable future.
I hope that the Government will take what I say seriously. I know that the best way to keep a secret is to say something on the Floor of the House at 1.47 am, but, if the Government examine the economic impact of tax expenditure and address it to the family life cycle, I should be happy. They could go a stage further and take up the suggestion of Family Forum—an organisation that brings together many national voluntary organisations concerned with family policy—consider taxes and benefits over the family life cycle, publish a Green Paper that examines the issues and put them on the political agenda.
Not only the directors of building societies and those who are not keen on the way that they are run, but most of the people in the country could be involved. We would achieve greater economic success, be able to give more help to those in housing need and stop giving help to those who do not have housing needs but who may wish to obtain mortgage interest relief on a special advance of up to £60,000.

Mr. Jim Craigen: The hon. Member for Woolwich, West (Mr. Bottomley) ended on an interesting point. I also believe that there are better times than 2 am to be discussing such an order. That is what I believed until I heard the Economic Secretary to the Treasury, when I realised that my hon. Friend the Member for Bakckburn (Mr. Straw) had done us a favour.
I served on the Statutory Instruments Committee on the two previous occasions when the amount was uprated. The first time I was staggered that it was being increased by 25 per cent., but last year we increased it by 50 per cent. Now the Economic Secretary tells us that he will increase it by 60 per cent. With great subtlety, he told us that it is

a new method of public expenditure cuts and a means of saving parliamentary time. Presumably it will also save five Treasury people from having to sit in the box at 2 am.
However, as my hon. Friend the Member for Ipswich (Mr. Weetch) said, there is a need for constant scrutiny of and vigilance over the activities of the building societies. It is important that we should have these annual reviews.
The way the Government bring out figures of 60 per cent. when it suits them, and the fact that they are not in favour of the indexation of unemployment benefit or decent pay increases for health workers is inconsistent. However, we live in inconsistent times with this Government.

Mr. Peter Bottomley: The hon. Gentleman makes a useful point. His strictures about the Government may or may not be correct. They certainly apply to the National Union of Mineworkers which argues that health workers should get a 12 per cent. pay increase and then immediately puts in a pay claim that is three times larger.

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I hope that the hon. Gentleman will not follow that point. It is well wide of the order.

Mr. Craigen: It is too early in the morning for me. I ask the Economic Secretary what I asked the Financial Secretary the last time we uprated the order. How many building societies are crashing against the £37,500 ceiling to keep within the 10 per cent. limit? On the last occasion we uprated the order, few building societies had a problem. If I remember correctly, there were only about half a dozen building societies in the South-East of England. The figure in all the major building societies was between 4 per cent. and 6 or 7 per cent. We are talking about a few building societies and they hardly represent the building society movement.
My hon. Friend the Member for Ipswich referred to competition with the banks. The way that the Government appear to be moving distorts the purpose of the building societies, in the longer term. I understood that the primary object of the building societies was to fulfil a social need. They are now turning increasingly to commercial purposes. That will hardly help home ownership throughout the country. I assure the Economic Secretary that the majority of constituents that we represent are not looking for—much less receiving—mortgages of £60,000.
How many building societies are up against the current limit? My hon. Friend the Member for Ipswich is a scourge of the secret world of the building societies. He spoke about the way these matters are monitored. I do not intend to follow him into the intricacies of the Anglia Building Society. I am glad that he did not take exception to money moving north of the border to help in Scotland.
I hope that the chief registrar will also look at indexation in respect of industrial and provident societies. There is sometimes an inconsistency in their upratings.
If the object of the original legislation was to contain the risks and to avoid what happened in the early sixties, the Government's proposed substantial uprating is nonsense. I refer the Economic Secretary to the question that I raised with him in April about the national scope and character of building societies. I suggested that he ask the registrar to establish a working party to make recommendations about appropriate methods of control by shareholders in such societies to ensure more effective control by investors.
The Minister was good enough to say that these points would be borne in mind. When do the Government intend to bring forward substantial legislation covering the operation of building societies? This will be increasingly important. The more that it appears that building societies are to be in competition, if not at loggerheads, with the banks, the more necessary it is that we should reassess the social purpose that now seems to be diminishing in the building society movement.

Mr. Peter Fry: I had no intention of taking part in the debate until I listened with incredulity to the speech by my hon. Friend the Member for Woolwich, West (Mr. Bottomley) and to the speeches of some Labour Members.
My hon. Friend has asked the Economic Secretary to listen to a certain type of argument. I beseech him not to listen to it. I do not know what section of the Conservative Party my hon. Friend represents, but it is not the same section that I have represented for 12 years, nor that which the bulk of my colleagues represent. To suggest that middle-aged, or slightly older men do not need mortgage relief—that was the tenor of what my hon. Friend was saying—would be not only unfair on middle-aged people, but political suicide. Even the Labour Party would not go as far as my hon. Friend.

Mr. Deputy Speaker: Order. The hon. Member must confine himself to the merits of the proposed changes contained in the order and he is moving very wide of that.

Mr. Fry: I was merely attempting to answer the arguments of my hon. Friend, but I think that I have made my point.
I sympathised with the hon. Member for Ipswich (Mr. Weetch) and his criticisms of many boards of directors of building societies. He was commending the banks for their competition over loans for house purchase. However, his hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) seemed to argue that competition was a bad thing. He argued that building societies were there for a social purpose and should not be going into commercial lending, and expanding their activities.
However, have not the consumers benefited from the extra competition between the banks and the building societies? Does the competition not help the potential house purchaser in the long run? Surely one of the merits of the order—I do not have particularly strong views about it—is that it attempts to free the building societies from a restriction. We shall all benefit from greater competition because that will release more of the energies, and encourage more of the investment, that we want on both sides of the House.

Mr. Craigen: I should like to help the consumer, but I feel that the conditions under which the building societies are operating might not do that.

Mr. Fry: I accept that.

Mr. Bruce-Gardyne: We have had an interesting, wide-ranging and valuable debate on the order. I am reluctant to comment on the suggestions made by my hon. Friend the Member for Woolwich, West (Mr. Bottomley)

if only because I should not wish to be lynched by my hon. Friend the Member for Wellingborough (Mr. Fry) for so doing. All that I can say to my hon. Friend the Member for Woolwich, West is that our party has always believed, and will continue to believe, in the virtues of a property-owning democracy. That is a principle to which I am sure both my hon. Friends would subscribe strongly.

Mr. Peter Bottomley: I agree with that, and I only wish that my hon. Friend the Member for Wellingborough (Mr. Fry) had paid as much attention on the point on which he agreed with me as he did to the point on which he disagreed. I am merely asking the Government to look into the stage in life at which that help should be concentrated and into whether it is right to give twice as much help to mortgages as we do to life insurance, which is just as important.

Mr. Bruce-Gardyne: I should be ill-advised to proceed further down that line. I take note of what my hon. Friend says. These are interesting suggestions, which we shall need to consider with care. To go further than that might land me in trouble, and I always want to avoid trouble at this hour of the morning.
I thank the hon. Member for Glasgow, Maryhill (Mr. Craigen) for drawing attention to a justification for the order which I confess that I had not thought of—that we should be saving public expenditure. As he knows, that matter is always close to my thoughts. I am very grateful to him for reminding the House of that valuable consequence of the proposition before the House, which is that we should pass an order to exonerate the House from the need to consider these matters for several years. I shall come back later to what the hon. Member said about building societies' legislation. It was the marginally more substantial part of his argument.
First, however, I want to comment on what was said by the hon. Member for Ipswich (Mr. Weetch). He takes a close interest in these matters and has followed with particular care the affairs of the Anglia Building Society. He has built some wide propositions on the rather narrow base of particular errors which have been established in the returns of that building society. He advanced the proposition that building societies in general were engaged in highly speculative investment in propery companies, and so on, and were using the special advances for that purpose. Perhaps he could give us chapter and verse to sustain that proposition. I have a feeling that he is generalising from a very narrow base.
I want to put the hon. Member for Ipswich right on one matter. My hon. Friend the Member for Ludlow (Mr. Cockeram) rightly intervened to point out that he was wrong when he talked about scrutiny by the Treasury. There is no question of scrutiny by the Treasury. That is not the statutory responsibility of the Treasury. It is the statutory responsibility of the Chief Registrar of Friendly Societies, and he has the authority to scrutinise the affairs of building societies.

Mr. Weetch: I understand that it is the responsibility of the registrar to scrutinise the financial documents sent to him by building societies. However, is it not true that the Treasury bears the political responsibility at the end of the day? When I or anyone else asks questions in the House about building societies, the Treasury answers. Therefore, the ultimate political responsibility lies with the hon. Gentleman's Department.

Mr. Bruce-Gardyne: It is, of course, true that my right hon. and learned Friend the Chancellor of the Exchequer and I are answerable for the affairs of the building societies in so far as they properly come under the scrutiny of this House, and of course it is true that legislation is the responsibility of the Treasury.
That brings me to the question put to me by the hon. Member for Maryhill about legislation. We accept that some time has elapsed since the last building societies legislation. We accept that there have been substantial changes in the environment in which the building societies have to operate and that there are anxieties about some aspects of the functioning of the building societies. They are not always those that attract headlines in the press. We also have to consider the wider implications of the evolution of the building societies in competition with the banks and their corporate structure.
It may be that in the foreseeable future those will be appropriate subjects for legislation, but I have to tell the hon. Gentleman that I can see no prospect of a slot for such legislation during the lifetime of the present Parliament. There is however, a real prospect that the next Conservative Government after the general election will look seriously at the possibility of legislation. We shall also consider the case for legislation to deal with some of the matters that the hon. Member for Ipswich has raised on this and other occasions.

Mr. Craigen: Is it really because of the strictures of the Leader of the House rather than the desire of the Treasury that there will be no time during the current Parliament for such legislation?

Mr. Bruce-Gardyne: The hon. Gentleman probably knows the answer to that question as well as I do. We have a full legislative programme before us in the next year of Parliament and quite enough to occupy us until the next election in 18 months time or whenever it may come. It would be wrong to encourage the House to expect that there will be a slot for legislation in the present Parliament, but these are matters that we shall carefully consider early in the life of the Conservative Administration after the next general election.
I turn now to one or two of the specific points that were raised by the hon. Member for Ipswich. Some of his more generalised strictures could benefit from some substantiating evidence, but he had a fair argument when he referred to the impact on the banks of the truth of lending provisions of the Consumer Credit Act. It is a fair point that, as the building societies and the banks move more and more into competition, we shall have to consider whether it is not appropriate that similar rules should apply to the building societies. However, I do not believe that that can in any way be regarded as on all fours with the restriction which is the subject of the order before the House today and which does not apply to the banks and has a narrow but dramatic impact on the lending activities of the building societies. I shall come to that point in a moment.
The hon. Gentleman asked about the availablility of the form AR11. As a student of these matters, he knows that under section 88(4) of the Building Societies Act 1962 a society is not obliged to furnish the return to a member until the date of the annual general meeting. Under section 88(1) the AR11 must be returned to the registrar within the first three months of each financial year. It is then

available for public inspection at the registry on payment of the appropriate fee. We shall have to look at those markets if there is a slot for legislation in the next Parliament
My hon. Friend the Member for Ludlow made an interesting point about the impact of the 10 per cent. annual limit on advances on the structure of advances throughout the year, but his suggestion, too, could be put into effect only in future legislation. It may raise complications, but I agree that we should look at it when we consider legislation in the next Parliament. I cannot promise my hon. Friend action before then.
The crux of the matter is the suggestion that by approving the order we shall be pushing the building societies away from the lower end of the market and towards the luxury bracket. There were occasions when the hon. Member for Blackburn (Mr. Straw) sounded like the sort of critic who writes a review of a play without seeing it. A number of the arguments that the hon. Gentleman attributed to me were not those that I had advanced, but I leave that aside. The picture that the hon. Gentleman painted of building societies being pushed up market by the increase in the special advances Emit is a travesty of the facts. Special advances accounted for only 1.5 per cent. of all advances last year.
In addition, building societies are not short of liquidity. Their liquidity ratios are high. They are not suffering from an acute need to ration their mortgage activities. The increase in the order, which reflects no more than the sensible limit for prudential considerations, cannot have any impact on borrowing at the lower end of the market.

Mr. Straw: There is a low demand for advances, but when demand firms up the availability of funds at the upper end of the market will surely have an effect on the lower end. The hon. Gentleman believes in the crowding-out theory.
Secondly, if the increase will have no effect, why are the Government wasting the House's time by proposing that the limit be increased from £37,500 to £60,000? Why do it if it is not to have an effect?

Mr. Bruce-Gardyne: There is a simple answer to the hon. Gentleman. It is not true that there is a shortage of demand. The liquidity ratios of building societies are high. That is largely because we have entered into an era of much fiercer competition between the banks and the building societies. Building societies are battling for a market share. The beneficiaries are the mortgagors. It is right that they should be.
There is no threat to the availability of mortgages at the lower end of the market. Special advances have little bearing upon total building society advances. The argument of crowding-out could not and does not arise. There is nothing remotely inconsistent between that and the proposition that I am submitting to the House that we should increase the limit to £60,000.
I am not suggesting for one moment that the present limit involves a substantial diversion of building society resources. It plainly does not. I am suggesting that by increasing the limit to £60,000 we will eliminate a narrow area of difficulty for one or two societies and ensure that we do not have to return to the House in 18 months' time to repeat the exercise. That would be pointless.

Mr. Craigen: We are spending all this time and public expenditure debating what the Economic Secretary tells us is negligible and helps only one or two societies.

Mr. Bruce-Gardyne: I am grateful to the hon. Gentleman for making precisely my point. By accepting the order we shall be able to ensure that the House will not be submitted to this experience and that public expenditure will be saved in future years. On prudential grounds there is every reason to increase the limit. In circumstances where building societies are required to compete with banks which do not face such a restriction, there is every reason to commend the order to the House, and I do so.

Question put and agreed to.

Resolved,
That the draft Building Societies (Special Advances) Order 1982, which was laid before this House on 22 June, be approved.

Mr. Peter Bottomley: On a point of order, Mr. Deputy Speaker. A few minutes ago the hon. Member for Blackburn (Mr. Straw) made a remark that might have been taken as referring to one of my hon. Friends. I am sure that he would wish to withdraw any personal imputation against any hon. Member.

Mr. Straw: Indeed, I would withdraw any personal imputation that may have been read into what I said.

Orders of the Day — Flooding (Planning Permission)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gummer.]

Mr. Peter Fry: I wish to raise a most disturbing matter which could well affect householders in many parts of Britain.
A serious gap exists between the statutory obligations of various public bodies, the Ministry of Agriculture, Fisheries and Food, the Department of the Environment, local councils and water authorities, whereby planning permission can be given for building on land known to be subject to flooding, where a house may be built and purchased only for the occupier to find that no authority is obliged to provide protection or remedy.
The main tenor of my remarks should be directed to one of the Minister's colleagues at the Department of the Environment. I am fully aware of the responsibilities of the Ministry of Agriculture, Fisheries and Food for grants to assist in this direction, but such is the deficiency of the law that the answer must be one of consultation between my hon. Friend's Department and the Department of the Environment if there is to be any satisfaction.
I shall try straight away to clear the argument that it is the householder's responsibility alone to take out insurance that will cover the costs which are often considerable, if his house is flooded. To take out insurance is, of course, a prudent step, and as an insurance broker I agree with it, but once there have been several serious claims insurers will either increase the premium or decline to renew the insurance. At the very least they will impose considerably more onerous terms. A crucial factor is that there is no power to insist that an insurer offers cover for flood. In this context the insurance argument should not be taken too importantly.
Over the past few years there have been many serious instances of flooding in parts of my constituency, especially in August 1980 and in June 1981, when within 12 months there were rainfalls that we were told were supposed to happen only once in 60 years—so much for the value of rainfall statistics. After much badgering, it has been possible to obtain a number of relief schemes, partly with grants from the Ministry of Agriculture, Fisheries and Food and partly with help from other bodies. I am grateful for what has been done in many parts of the country. However, there remain areas where nothing seems likely to be done.
To illustrate such cases I shall refer to Mrs. Brooke of Orlingbury Road, Little Harrowden, Near Wellington. In August 1977 she and her late husband became the third owners of No. 63 Orlingbury Road. It is a pleasant bungalow set slightly above a stream which runs through a culvert under the county road at the front of the property. The normal survey was undertaken when the bungalow was purchased and searches were made. There was no mention made to Mr. and Mrs. Brooke that the land was subject to flooding.
For the first three years that Mr. and Mrs. Brooke lived at No. 63 there was no excessive rainfall and no real danger appeared. However, in August 1980 there was widespread heavy rain and the land was flooded to several inches up the walls of the bungalow. Mr. Brooke became very distressed and worried about this. He was extremely disturbed that there might be a repetition. Although he had


retired he had been reasonably fit, but the dread of a repetition of the flooding problem undoubtedly played on his mind. When in June 1981 there was even heavier rainfall that caused severe flooding to a depth of l0ft, Mr. Brooke became ill during the flooding. He died in hospital the next day of heart failure.
There seems little doubt that it was the dread of flooding and the appalling situation when it reached his home on the night in June that justifies Mrs. Brooke's claim that the flooding worried and killed her husband. Naturally she and her neighbours, whose property was also flooded, continue to be alarmed at the prospect of further heavy rainfall. It is clear that something needs to be done.
To see what was possible I called upon the Northamptonshire county council, Wellingborough borough council, the Anglian water authority and a representative from the Ministry of Agriculture, Fisheries and Food. The result of the joint consultations is that from the Ministry's point of view the cost of a scheme to prevent future flooding would be about £42,000 and it considers that that expenditure would not be cost-effective as only three dwellings would be involved. Therefore, no grant would be forthcoming. The Anglian water authority's view is that the stream is not a main watercourse and, therefore, there is no liability upon it. Northamptonshire county council could not see that the bridge aggravated the situation so it decided to make no contribution. Only Wellingborough borough council—not the original planning authority—offered, to pay with no obligation to do so, half the cost of the suggested scheme. But because no other authority or individual came forward with a contribution no further action was taken.
In some such cases riparian owners have a responsibility. Because the water for the street is drawn from a wide area, it is not just the responsibility of the nearest farmer and it is difficult to establish a case against any of the riparian owners. As a result, no help has been made available. The cost of the scheme is beyond the means of local residents.
For clarification I shall refer to the report prepared for the Northamptonshire county council policy and resources committee in May this year. It throws extra light on the case. It says that the planning history of the site goes back to September 1962 when
the Nene River Board informed the County Council that there were no land drainage observations but recommended that the 30ft wide unobstructed berm be left along the edge of the watercourse.
As a result the county council authorised outline planning consent with a copy of the river board's letter, and in June 1966 outline permission was granted by the district council.
The report continues:
In January 1967 the developer submitted details after the Outline.
Only after examination of the details did the river authority say that it merely wished construction to be kept clear of the 30ft berm, as previously requested.
In March 1967 the river authority told the county council:
We have no accurate record of the extent of flooding in this tributary stream, but it does appear that flooding would occur on the low area of the south east … of Orlingbury Bridge and it would be prudent if this site was raised.
It said that the berm could be reduced to 20ft rather than 30ft. The county council still authorised the issue of

planning consent and a copy of the local authority's letter was attached. Detailed permission was issued in March 1967.
The report states that in May 1967
The farmer of the land on the opposite side of the stream wrote to the District Council complaining that the developer was raising the bank immediately adjacent to the watercourse.
He said:
As you must know, this stream is subject to flooding during periods of prolonged rain, and if the Harrowden bank is to be built up, it will mean that the whole of the flood water will pour onto our land … unless something is done to get the water away more quickly at the bridge and its approaches.
Nothing was done to ensure that the water would get away more quickly. The developer slightly built up for the houses and although it was taken up with him, it is clear that there were no strong observations from the river authority, nor the local authority—the Wellingborough rural district council—when the development took place.
The county council says that because the letters from the river authority were attached to the planning permission,
Such information about the potential risk of flooding as was available … was passed on to the developer who was thus put on notice that the land was liable to flood and ought to he raised. The developer and subsequent purchasers provided they or their buyers had inspected the planning permission, would have notice of the possibility of the land flooding.
I doubt whether that information was available or properly conveyed to any purchaser—first, second or third—of that property. It is clear that the river board completely miscalculated the extent of the danger. Nor does it seem to have investigated the site properly. The original planning authorities—the old county council and the old rural district council—no longer exist. Only the Wellingborough borough council is taking any interest in the problem.
Any casual conversation with some of the long-term inhabitants of the village confirm what the farmer said in his letter to the district council in 1967. The land was known to be subject to flooding. With present knowledge it is easy to say that the developer should not have built on the land without taking more protective measures. But he was given planning permission with little restriction by the district council and the old county council. It is clear that the river authority's advice was inadequate and not properly considered by the planning authority at the time.
Even if the advice from the river authority had been stronger, as I understand the state of the law there was not then and is not now any obligation on the planning authority to abide by that advice. It could still give planning permission if it wished. The developer has long since completed the work on the site and moved on. Hence my constituent has a tremendous dilemma and a continuing cause for concern.
What should we make of the case? First, it is no use depending on the developer in such circumstances. In some parts of the country, developers have gone out of business since they built estates. Secondly, it is no good relying on the existing law, as the public bodies concerned have only optional powers and are not compelled to assist people who are in distressing circumstances. Thirdly, it is no use relying on the individuals to insure themselves because that can be unsatisfactory.
There must be many similar cases, especially where the danger that I have described applies. Many householders will not receive the protection that they believe that they deserve or expect. We cannot allow the problem to


remain. There is a gap in the existing arrangements to which the Government should address their mind. What can be done?
First, the Government must accept that there is a problem. It is acute for people such as my constituents. Secondly, when planning permission is being considered, the advice of the water or river authority must be given much greater weight than the law allows at present. If the water or river authority gives incorrect advice, it should be liable. Thirdly—this may be the real answer—if planning permission is given, some form of responsibility must flow from the giving of that permission. Full responsibility could be placed effectively on the developer if it were decided that a bond must be paid to cover the cost of remedial work on a site that is likely to be flooded. Another option is for the planning authority to accept the obligations that flow from the permissions that it gives.
That is the type of approach that many people expect. The matter is urgent. Another bad winter or another heavy rainfall could cause enormous distress.
I hope that my hon. Friend will discuss this with her collegues at the Department of the Environment so that one of the public bodies at least has the clear responsibility to protect the homes and property of those threatened by flooding.

The Parliamentary Secretary of the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): I congratulate my hon. Friend the Member for Wellingborough (Mr. Fry) on the very graphic way in which he has presented the arguments on behalf of his constituent. May I say at the outset that I very much sympathise with his constituent's plight. To be flooded is in itself a harrowing experience even though the water may be only inches deep. What is perhaps just as bad, as my hon. Friend pointed out, is to live in the constant fear that heavy rainfall will cause another flood.
Before I try to deal with the points raised by my hon. Friend, I must outline the powers and functions of the various authorities concerned. The main legislation concerned with the prevention of flooding is the Land Drainage Act 1976 which consolidated a number of previous Acts on the same subject. The Act divides watercourses into three separate categories, each being the responsibility of a separate group of authorities.
First there are those watercourses which are designated by the Minister as "main rivers". These form the primary drainage network in the country. Using the railways as an analogy, they could be regarded as the inter-city lines of the system. Main rivers are the responsibility of the water authorities and only these authorities have power to carry out work on them. Similarly, anybody or any authority wishing to do anything such as building a culvert or putting a structure on the banks of a main river must first get permission from the water authority.
Second in order of importance from the drainage point of view are those watercourses which drain areas designated as internal drainage districts. These are invariably low-lying areas such as the Fens or the Somerset levels where constant attention to drainage is essential if they are to remain in productive use. There are, however,

no internal drainage districts in the area in which my hon. Friend is interested, so I shall not spend any more time describing their problems.
Finally, there are all other watercourses—all the streams and brooks which carry the drainage water off the land and take it to the main river and thence to the sea. As my hon. Friend knows, these other watercourses are generally the responsibility of the riparian owners—that is, the people who own the land on each side of the stream. If there are blockages which prevent the free flow of water, these owners can be required by law to clear them. However, district councils also have powers to carry out any necessary work to prevent flooding caused by these minor watercourses. The powers are totally permissive and there is no statutory obligation on the district councils to do anything if they choose not to.
I turn to the important question of finance. Under the Land Drainage Act 1976, my Department is empowered to pay grants to water authorities, internal drainage boards and district councils in respect of expenditure incurred in carrying out river improvement or flood protection works. The rates of grant payable to the different authorities vary, but on average they amount to about 50 per cent. of the approved cost.
There are, of course, a number of conditions which have to be satisfied before grant may be paid, but the three most important requirements are that the design of the work is satisfactory from the engineering point of view, that the estimated cost of the work is reasonable and that sufficient benefit will arise from the work to justify the cost. This last requirement, which is perhaps the most important in this case, is known as the cost-benefit test.
Where a flood protection scheme is intended to protect houses or other property, the benefit is assessed by evaluating the damage which occurs or which might occur during a flood and aggregating this over the total expected life of the engineering works. A period of 50 years is usually taken. These values are then discounted to bring them to present-day value and compared with the estimated cost of the work. Where appropriate, other intangible but important benefits—such as the danger to human life or health—may also be taken into account in making the final assessment.
Against this background I should now like to comment on the flooding about which my hon. Friend spoke so eloquently.
First, there is the question of which authority has the power to carry out flood protection work at Little Harrowden. The answer is that the stream in question is not a main river, nor is it in an internal drainage district, so it falls to the district council to do the work if it wishes to.
Next, there is the nature of the work that would be needed and its probable cost. I am advised that the work would fall into two parts—first the improvement of the channel of the stream itself which is estimated at £10,000 to £15,000 and, secondly, the replacement of the existing road culvert which is estimated at £25,000 to £30,000. There is some question whether the cost of the road culvert should be met by the county council as the highway authority, but clearly that is not an issue on which I can comment. It must be resolved by the two authorities.
Therefore, the total cost of the scheme is likely to be, as my hon. Friend said, about £40,000. If my Department is to pay grant we shall need to be satisfied on the benefit side and here there is considerable difficulty. My hon.


Friend referred to three bungalow units being involved. I understand that there are five units altogether—two semidetached pairs and one detached unit. My Department's engineers have looked at this as sympathetically as possible but state:
by stretching every point to the limit of credulity"—
I quote from their advice—they cannot bring the discounted benefit to more than £8,000. This is so far short of the estimated cost of £40,000 that it puts the scheme out of court so far as grant aid is concerned.
My hon. Friend will no doubt think that a harsh decision, but he will appreciate that taxpayers' money is involved and we must be satisfied that it is spent only on worthwhile schemes. This cost-benefit test is applied to every application that is made to us for grant aid under the Land Drainage Act 1976 and if we started to make exceptions we should be on a very slippery slope indeed.
There is, of course, no reason why the district council should not carry out the scheme without grant aid, but I can quite understand its unwillingness to do so. Indeed, I understand that it has generously offered to contribute £20,000 to the total cost of the work but that, in view of the county council's decision not to make a contribution and my Department's decision not to pay grant, the district council is not prepared to meet the whole cost.
My hon. Friend referred to the fact that planning permission had been given for the bungalows to be built and suggested that some responsibility rested on the planning authority to see that houses are not built in flood risk areas. The statutory responsibility of planning authorities is a matter for my right hon. Friend the Secretary of State for the Environment, but the giving of planning consent for development in flood risk areas is one that my Department and the Department of the Environment have recently been considering. I trust that, to that extent, my hon. Friend is satisfied that we do understand that the matter is important.
In circulars issued to planning authorities in 1962 and 1969 the risks of allowing development in areas which were liable to flooding were emphasised, and planning authorities were urged to consult water authorities before giving planning consent. These circulars have recently been revised and an up-to-date version will be issued shortly. However, I do not: think that this will solve all flooding problems, I understand that there was, in fact, consultation with the Welland and Nene river board—the predecessor of the Anglian water authority—in 1967 about the proposal to build bungalows on the land at Little Harrowden. There had, however, been no history of flooding on the site, and the river board did not advise against the development, so I do not think that either of the authorities can be blamed for allowing the building to go ahead.
In the light of this explanation, I fear that I cannot offer any help to my hon. Friend's constituent. There are numerous places thoughout the country where houses and other property are at risk of flooding whenever there is exceptionally heavy rain. For example, hon. Members will remember the very serious flooding which occurred in York and Selby last winter, a subject on which I spoke in a recent Adjournment debate. Where flood alleviation work can be carried out at a reasonable cost in relation to the benefit, these flood risks will gradually be eliminated, but it would be unrealistic for me to look forward to a day when all flood risks have been removed. There are some places—I fear that Little Harrowden may be one—where the investment of public funds to prevent flooding is quite out of proportion to the damage caused. I am sorry to end on such a depressing note, but I know that my hon. Friend would rather have a straight answer than a string of pious hopes.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to Three o'clock am.